Bailout Watch 538: Feds to "Buy" Delphi for GM for Undisclosed Billions
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.
More by Robert Farago
Comments
Join the conversation
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.
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.
@ 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....
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.