GM in Talks to Take Back Parts of Delphi

The General Motors spin-off of Delphi which never really was, isn’t. Today’s Wall Street Journal [sub] has another “people involved in the negotiations”-sourced story claiming that these latest moves are all “part of a strategy to qualify for additional government loans”. Delphi has never really been an independent company from the start. The obvious reason of course is that GM provides the vast majority of Delphi’s business. But more than that, GM is on the hook for Delphi’s pension costs, has paid the price for voluntary separations at Delphi and has repeatedly been the source of bailout bucks for Delphi. Considering that “since 2005, GM has poured in $11.7 billion to help sustain the company,” they might as well just call it the Delphi Division. But how do federal bailout dollars get wrapped up in this mess?

“As a separate company from GM, Delphi isn’t eligible for the government’s auto-bailout aid at this point. In assuming control of some of Delphi’s operations—representing up to 20% of Delphi’s total sales—GM would be taking a calculated bet it can creatively pry more support from the government. As long as GM owes the government money, all its transactions over $100 million are subject to approval by the Treasury Department, which oversees loans to the auto makers. As it reviews a proposal for GM to absorb part of Delphi, the Treasury could borrow from the approach Washington took on the financial-sector meltdown last fall, seeing value in the consolidation of otherwise-failed businesses.” Yeah Sparky, we see how well the Wells Fargo-Merrill Lynch thing has been going, so lets do the same with GM-Delphi!

Delphi has been stuck in bankruptcy court for three years now and can’t get out because nobody wants to lend it any money. This latest Hail Mary pass is built on the belief that lenders would be more likely to give Delphi money if it did less business with GM, and that the government will give GM even money if it clearly owns even more money-losing factories. The madness of it all boggles the mind. Good luck sorting this out Mr. Car Czar, whoever you are! Meanwhile, the executive bonuses and Wall Street advising fees paid out celebrating the birth of Delphi remain in the hands of the masters of the universe who cooked the books to make it happen.