Treasury Wants Delphi Dead

Edward Niedermeyer
by Edward Niedermeyer

The Freep reports that the Treasury has blocked GM’s plans to buy Delphi’s unwanted steering business, while putting the kibosh on $150 million in payments that GM had planned to keep its major supplier operating through May. This puts Delphi, GM, The Treasury and creditors on a shorter timeline to resolve Delphi’s three-year-long bankruptcy; a deal must now be reached by May 9. If a deal isn’t reached by then, Delphi will be liquidated, GM will have to buy back mission-critical plants, and new suppliers will be contracted. So now you know why GM is idling most of its plants this summer: if parts stop shipping, there won’t be an (unplanned) production disruption. What isn’t clear is why the Treasury thinks a Delphi liquidation is a desireable outcome. After all, $5 billion has already been earmarked to help guarantee OEM payments to suppliers. Maybe Treasury actually thinks that money would be better off spent on ads. More likely though, the Treasury boyz want a top-to-bottom restructuring to go down next month, and Delphi’s lingering bankruptcy (and estimated $2billion yearly cost over competition according to GM) put it squarely in the “Bad GM” camp. And so it burns.

Edward Niedermeyer
Edward Niedermeyer

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  • Landcrusher Landcrusher on Apr 28, 2009

    Wasn't Delphi kept alive because the courts kept GM from pulling the exact same stunt they are trying to pull off now (dumping liabilities on a spun off entity)? I'm sorry, but if you are looking for a way to damn free enterprise, the domestic automakers are not a good example. They aren't all that free, and have not been for decades.

  • Paris-dakar Paris-dakar on Apr 28, 2009
    Oddly enough, a government agency is forcing through the kinds of drastic changes which free enterprise wasn’t able to accomplish visa-vis Delphi. I don't know if I'd chalk this fiasco up to 'free enterprise'. The UAW has alot to do with the death-from-cancer that Delphi has been suffering from.
  • Geo. Levecque Geo. Levecque on Apr 29, 2009

    It makes sense that all vehicle production should be done in the USA, I sense the only reason that the Detroit three makes vehicles anywhere else is that its cheaper in both wages and to a lesser extent shipping of product to the Market, what's going to happen to the CAW is a good question as far as vehicle production, the CAW has other irons in the fire in other industries, but vehicle manufacturing is a big percentage of there dues! We all live in interesting times eh?

  • Snafu Snafu on May 01, 2009

    Agreed the legacy cost associated with the union (bennies&wages) along with the huge jobs banks that guaranteed 85% of those JB’ers hourly wages for a spread of 3-5 years. Then you have all the untold stories that if collectively assembled into one tell tail bio, would exemplify some of the poor business practices that go on inside of Delphi. Foolish decisions, speculating, with a blind eye to internal issues needing addressed. Yes this is the spin off that GM needed to finagle some fiscal slight of hand and at the same time, Battenberg and Dawes were pilfering pennies from the Delphi coffer until that came to a head in October 05. One of the underlying issues today is the fact the Delphi rule is still largely done by a management reared from the GM gene pool since its spin off in 99. These issues haven’t gone unnoticed by those customers of Delphi. In the 42 months while in bankruptcy the stigma of bad decisions and counterproductive activities have been blanketed by carry over products and designs that in most divisions do not have an advantage over their competitors, for the most part but not all. Those customers kept a Delphi business alive by trickling awarded programs thus creating leverage against other suppliers that has helped to keep new product costs low as Delphi struggled to competitively price their products. Warning Will Robertson, it will take another couple years for this ugly kid to fully rear its head as some of those decisions made are starting to become apparent.

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