Beijing Swallows Big Chunk Of Delphi. For Starters, Possibly

Delphi is the former GM parts division. It had been spun off, only to go into bankruptcy not much later. Delphi also was amongst the first to embark on an aggressive “source in China” policy. Large chunks of Delphi’s production were moved to China. Large chunks of Made-in-America cars were actually Made-in-China. Now, China buys large chunks of Delphi. Possibly all of it.

According to the Freep, two Chinese companies and the Beijing government banded together to buy Delphi Corp.’s brakes and suspension business. The Chinese auto supplier Tempo Group will acquire a 24 percent stake, China’s Capital Iron & Steel Co. will purchase a 51 percent stake, and the Beijing government will own the remaining 25 percent. They will form a new Chinese company called Beijing West Industries Co. Ltd., based in Beijing. Delphi needs the money:

Again according to the Freep, “The Chinese will pay $100 million in cash for the Delphi businesses. The deal gives Delphi, which is struggling to emerge from bankruptcy protection much-needed capital and allows them to exit businesses they are no longer interested in keeping.”

Delphi agreed earlier this month to sell its global steering business back to GM.

The deal also gives the Chinese industry access to know-how, technology, and markets: Delphi’s brakes and suspension business has more than 750 patents. It also employs 3000 people in the United States, Mexico, Poland, India and China.

The Freep celebrates this as “the most high-profile acquisition yet by the Chinese in the American auto industry.” This could quickly be old news. There may be bigger deals in the works.

Two weeks ago, Gasgoo (along with a bevy of other news outlets) reported that Beijing Automotive Industry Holding Corp. is interested in buying assets of Delphi or even a bid for all of Delphi’s assets. Beijing Auto is Daimler’s joint venture partner in China and used to be Chrysler’s joint venture partner. When this came up, a source at Beijing Auto mentioned that Delphi was already in the process of chopping its non-core businesses, such as brakes and suspensions. At around the same time, Beijing Auto was also rumored to have designs on Chrysler, but the rumor was quickly denied.

“If conditions permit, we do not rule out the possibility of acquiring Delphi,” as a whole, the source said. When these rumors circulated, Automotive News [sub] said that “Delphi and GM need each other to survive.” They cited Kirk Ludtke, senior vice president at CRT Capital, who said: “If Delphi runs out of money and has to shut down, GM shuts down too.” So by keeping Delphi alive, Beijing assists the US government in keeping GM alive. Unless a sloppy reporter had confused “Beijing West” with “Beijing Auto,” there might be more. “Step by step” is one of the core tenets of Chinese dealings.