Delphi Bailout Takes Shape. Or Not.

Sent to us from a member of our Best and Brightest, who’s been following former GM parts maker, and bankruptcy-stuck, Delphi’s implosion at an unsafe distance:

One bit of news last night, and two old known facts, that may be the tip of something bigger. 1. As expected, yesterday, Judge Drain extended the hearing on Delphi’s emergence plan until Tuesday, the day after the GM C11 2. The PTFOA [Presidential Task Force on Automobiles] has never said, and still won’t say, what price they are paying for the five US Delphi plants. 3 Platinum Equity has been sticking their nose in here [Delphi] trying to get to FMV for Delphi’s stuff. The first two on this list don’t make sense. The Platinum thing does. Here’s what could be going on . . .

GM doesn’t want Delphi’s output, it NEEDS Delphi’s output. If it doesn’t get it, the fed’s favorite automaker’s C11 will be a C7 liquidation in a few months, which would reveal all the president’s plans as a failure.

The PTFOA wants Delphi to emerge from bankruptcy. It would be a welcome bit of good news in a bad news cycle, a “C11 isn’t the end” moment. All they’d have to do: pay a little too much for the plants, help Delphi a bit with some of it’s “bad” assets, and help arrange some operating credit. A bargain in terms of cost and help for the GM deal.

Miller is in the cat-bird seat. He could set the price of a federal bailout at whatever it takes for Delphi to emerge from bankruptcy, including a little arm-twisting of one of the TARP banks for an operating line of credit.[NB: Miller doesn’t get paid big bucks until Delphi emerges from C11, and the PTFOA is considering him a candidate to run/wind down the “bad” GM.]

So, once again, the feds will cleave a bankrupt auto industry giant in two, stripping the good assets from the bad and selling the result to someone else. In this case, Platinum Equity would take a big chunk, bringing in Federal Mogul to run the “new” company.

Backing-up this scenario: the company has rescinded some Delphi employees’ mandatory “early retirement.” Also, obviously, the aforementioned leaked “announcement” earlier this week that “good” GM is set to buy back five of Delphi’s boat anchor plants and production lines—which sent Delphi PR into full CYA mode.