By on May 26, 2009

No surprise there. GM needs its former in-house parts maker to survive, and Delphi is as dead as a doornail. After almost four years in bankruptcy, no one in their right mind would invest in Delphi. In other words, you’re up! Automotive News [sub] reports the glad tidings (without once threatening to connect the dots): GM is to re-absorb five Delphi plants. “General Motors has agreed to assume ownership of five Delphi Corp. plants in the United States and operate the UAW-manned factories as a wholly owned subsidiary, according to union highlights of the tentative new contract between GM and the UAW . . . Delphi spokesman Lindsey Williams said announcing the deal is premature. ‘Any agreement regarding Delphi assets is subject to approval by lenders who have loaned money to Delphi in bankruptcy as well as approval by the court,’ he said.” Premature in the sense that adding to GM’s bailout bill is not to the most politic of maneuvers. Premature in the sense that Delphi was due in court on Thursday to hash out its impending implosion. But true, nonetheless.

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16 Comments on “Bailout Watch 538: Feds to “Buy” Delphi for GM for Undisclosed Billions...”


  • avatar
    lw

    Funny thing is that all this money isn’t really buying anything.

    The UAW will be so small after this round of Ch. 11, that they won’t be much of a political force even in 2 years.

    2 years ago GM had annual revenue of $180B…

    4 times Q1 2009 revenue = $90B a year

    Dropping the brands/dealers/plants in Ch. 11 will easily cut that in half to $45B.

    GM won’t be big enough to even have a decent lobbyist in a few years.

  • avatar
    unleashed

    Funny thing is that all this money isn’t really buying anything.

    Wrong…
    All this money buy Union Votes, not just UAW, for the next congressional and then presidential elections.

  • avatar
    lw

    unleashed:

    How many Union votes will be left? Union guys are being walked out left and right and will be left unemployed and penniless within 2 years. They will be bitter.

    Sure the union fed millions to the Dems… They got that money from active member dues. This is game over on that front.

    Maybe the UAW can take a billion from the VEBA and give it to the Dems or something, but the cash flow from member’s dues and the hundred of thousands in votes is being crushed.

    The UAW voting block is shrinking daily.

  • avatar
    unleashed

    The public sector is growing, and will continue to grow under Obama.
    That’s the Unions I’m talking about.

  • avatar
    John Horner

    Are these the same plants GM has been talking about buying from Delphi since February?

    http://www.detnews.com/apps/pbcs.dll/article?AID=/20090210/AUTO01/902100349

    As I understand it, GM isn’t buying back all of Delphi, but rather five or six plants it thinks are critical to GM operations. Is that correct?

  • avatar

    It will be interesting to watch public employee and private sector unions fighting over how to slice the pie, since nobody’s going to be making more pies.

  • avatar
    MikeInCanada

    I’d chalk up this one as a win for Delphi.

    They have wanted to get rid of these domestic UAW manned plants since day one, but could not find a way to do it without vaporizing the company in Bankruptcy Court.

    Delphi is primarily a US headquartered, foreign company. What ever US production will (soon) be exclusively located in right to work states.

    I’m making predictions: This (Delphi’s post BK business model) will be the future of the remnants of GM and ChryCo – after their second bankruptcy.

  • avatar
    wsn

    lw :
    May 26th, 2009 at 9:10 pm

    Sure the union fed millions to the Dems… They got that money from active member dues. This is game over on that front.

    —————————————

    That active member dues come from their salary. Their salary come from a combination of their work and cooperate debt (which they are defaulting now). The burden or that debt and more hidden structural cost are upon tax payers now.

    So, in essence their member dues come from tax payers.

  • avatar
    commando1

    Will someone remind me again why GM created Delphi and then spun them off??????

  • avatar
    Ingvar

    “Will someone remind me again why GM created Delphi and then spun them off??????”

    You stole my question…

    What inte the wide wide world were they trying to achieve? They spun off an obviously money-losing operation, in the hope that it would become someonelses problem. And then they failed, four years of bankruptcy later, they have to take it back again? What happened?

  • avatar
    Bunter1

    “It will be interesting to watch public employee and private sector unions fighting over how to slice the pie, since nobody’s going to be making more pies.”

    Right on Ronnie.

    The perpetual hand wringers alwaays miss this in their dream of “equality”. In it’s name they destroy “prosperity” and ensure a lower, but more “equal”, living for all. Yay.

    Bunter

  • avatar
    jolo

    commando1 asks:

    Will someone remind me again why GM created Delphi and then spun them off??????

    It was done to eventually send the company into chapter 11 so it could show the auto companies how to threaten the unions with liquidation if they did not capitulate their high costs.

    Plain and simple. And it has worked beautifully.

  • avatar
    Smegley

    Since when is Delphi too big to fail?

    Heck, I hope when the Sun Li Donut Shoppe down the street goes under Obama comes in and bails her out. They make the best apple fritters on earth – at 89¢ each a helluva bargain. Sun Li is too big to fail IMHO.

    Then again Sun Li is very likely a competent business person, so she, like you and me, will be stuck paying taxes to keep incompetence afloat, alive, and well, and making fat salaries.

    Cuz that’s the American way. Just ask Sun Li.

  • avatar
    guyincognito

    In vehicle final assembly it is true that labor only makes up ~ 9-10% of the cost and the differential between union and non-union/foreign labor costs is nearly negligable. However, in parts manufacturing US labor and overhead make building parts here ~30% more expensive than Chinese companies.

    @commando1,

    GM spun off Delphi and Ford spun off Visteon so they could buy cheaper parts from someone else. Unfortunately, the spin-off agreements and their inability to outsource enough parts left them paying high prices for most of their parts and paying billions for parts no longer supplied simply to keep Delphi and Visteon in business. In the end, they may have been able to show a net positive from this due to some accounting shenanigans but I doubt the actual costs were lower.

    This isn’t different from what Ford did several years ago in taking back ~12 Visteon plants under ACH-LLC.

  • avatar
    PeteMoran

    @ guyincognito

    GM spun off Delphi and Ford spun off Visteon so they could buy cheaper parts from someone else.

    IIRC, part of the GM/Ford Financial Wizards reasoning for spin-offs was that these internal businesses were “good” at what they did, so maybe they could sell to other companies. That strategy turned out to be a disaster too.

    Moving liabilities had a bit to do with it too, in the finest of Enron-esk traditions….

  • avatar
    mikiepp

    they worked for it, they deserve it. Don’t see you same people crying about the absurd wages of the bank execs. they do little or nothing, screw everything up, and somehow you justify their pay.

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