Bailout Watch 543: Delphi Emerges From C11
Bankrupt parts maker Delphi is set to finally leave bankruptcy, thanks to a little help from American taxpayers (who else?). OK, sure, technically, only a small fraction of Delphi’s just announced $3.6 billion dollar rescue pack will come from the federally funded “new” GM. We’re talking table scraps, at $250 million. Mind you, this cool quarter billion doesn’t include GM’s forthcoming purchase of five– count ’em five Delphi plants– at an undisclosed price. And if past history is a guide, well, let’s not forget that GM has taken more than $11 billion in charges against Delphi since they spun-off their money-losing division. As Automotive News [sub] reports, we don’t know how much Platinum Equity is paying to buy Delphi’s worldwide ops, or how much of the manufacturer they’ll actually own (i.e. how much we own). Although Bloomberg seized on Delphi’s exit strategy as sign that the auto industry has turned a corner, it’s probably more of a sign that the strip and flippers—cough Cerberus cough—-know a sucker when they see one.
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Why is GM buying Delphi plants? They spun them off so they wouldn't have to use sparkplugs and radios that cost 2 to 4 times as much as Toyota and Nissan. In breaking the link to Delphi, GM made all suppliers compete for the business on the basis of price and quality, not a union mandated buy. It also broke the link of the Delphi workers' wage rates to that of GM assembly line workers. Traditionally suppliers have had significantly lower wage rates. I guess Obama will make up the difference in costs with our money, but he will never make a Delphi sound system as good as a Pioneer.
What is left.