Bailout Watch 312: Is Delphi Next for Bailout Billions?

Well why not? If the the Fed can justify “emergency” approval of GMAC’s switch to bank status as a necessary step to save GM, it’s not that much of a leap to suggest that bankrupt parts maker and GM spin-off Delphi’s next in line for some bailout bucks. As we’ve said here before, no Delphi, no GM. Bloomberg puts it this way: “GM has already spent more than $11 billion to help Delphi, the largest U.S. auto-parts maker, exit bankruptcy. Delphi has been unable to get further loans to help it leave court protection because of stricter credit requirements and declining revenue from slow auto sales.” And now… “We would not be surprised to see additional government funds to GM to support a Delphi solution,” JPMorgan Chase & Co. analyst Himanshu Patel said in a report today. As JP is up to its eyebillions in GM, Chrysler, Chrysler Financial and GMAC, it’s a good bet this is more of a trial balloon than mere conjecture. Bloomberg points out that the idea of throwing some cash at, I mean arranging some loans for Delphi is no longer beyond the remit of the increasingly vaguely remitted $700b Troubled Asset Relief Program.

“The U.S. Treasury committed $6 billion yesterday to support GMAC, the financing arm 49 percent owned by GM, as ‘part of a broader program to assist the domestic automotive industry in becoming financially viable.’ Treasury hasn’t defined the scope of the program nor mentioned any specific future actions.”

If Delphi gets the dosh, the no-man’s land between bankruptcy and nationalization– euphemistically described as “an investment”– will expand alarmingly. Suppliers are next. And then what? Where will this end?