GM Once Again Owns Delphi
By Bill Visnic July 13, 2009By Bill Visnic
The seesaw saga of auto industry mega-supplier Delphi Corp. is over after coming full circle: General Motors Co. is buying most of the assets of the supplier formed in 1999, ironically, as a way for GM to offload from its balance sheet many very same operations it will once again purchase.
Barely a month ago it was reported GM and a division of the private investment firm Platinum Equity Group would purchase Delphi's assets after Delphi has stumbled in bankruptcy for nearly four years - with Platinum Equity paying more than $3.5 billion to assume much of Delphi's operations and GM taking only strategically vital portions of Delphi.
But it appears the roles have been reversed: GM, just days removed from its own Chapter 11 "quick rinse" bankruptcy and the recipient of an eventual $50 billion or more in government loans, is instead acquiring the lion's share of Delphi - and investing vastly more than Platinum Equity.
The Wall Street Journal reports the "new" GM - now known as General Motors Co. - will spend more than $3.5 billion in the deal, injecting into Delphi $2 billion in cash, a $500-million loan assurance and assume $1.1 billion of Delphi's remaining debt. GM also is "waiving" a $1.9-billion claim it has against Delphi.
Platinum Equity is investing just $250 million directly and loaning another $250 million.
The structure: GM will directly own Delphi's Saginaw, MI-based steering-systems business, as well as current Delphi plants or operations in Kokomo, IN; Grand Rapids, MI; Rochester, NY and Lockport, NY.
GM and Platinum Equity also are forming a new company to purchase the rest of Delphi's U.S. and international assets.
The arrangement was approved by Judge Robert Gerber, the same Manhattan bankruptcy judge who last week green-lighted GM's emergence from its own Chapter 11 reorganization after less than six weeks. In a hearing scheduled for next week, the deal must also be approved by the New York judge handling Delphi's protracted bankruptcy.
If finalized, the deal apparently includes the offload of Delphi salaried-retiree pensions to the U.S. government-run Pension Benefit Guaranty Corp., but GM would assume the pension packages of roughly 45,000 Delphi hourly workers.
If the deal is approved, also to be determined how much of - and who - among Delphi's existing management will remain.
As yet unaddressed is the future of Delphi top management, including controversial executive chairman Steve Miller, although it has been long assumed Miller would leave Delphi after it completed the bankruptcy process.
Miller helped initiate a firestorm over Delphi executive compensation when, as CEO and shortly after Delphi's bankruptcy declaration in October 2005, Miller submitted an executive-retention plan that sought to pay hundreds of millions in bonuses and other compensation to about 500 Delphi executives.
The scheme stoked ongoing class-warfare fireworks because Miller advocated steep pay and benefit cuts for Delphi's United Autoworkers Union hourly workers at the same time he proposed seemingly extravagant retention packages for executives, many of whom had were on duty during Delphi's slide into bankruptcy.
Miller, with considerable experience in restructuring distressed industrial companies and who worked with auto-industry icons such as former Chrysler CEO Lee Iacocca and current GM revival-exec extraordiaire Bob Lutz, said he would work for $1 at Delphi, but nonetheless proposed, as part of the company's executive-retention program, that several key executives' compensation include large bonuses if Delphi emerged from bankruptcy.
When Delphi earlier attempted to exit bankruptcy in early 2008, wire services reported at the time that Miller was in line to garner more than $8 million in compensation. Current CEO Rodney O'Neil was earmarked for a reported $5.3 million.
But bankruptcy-emergence bonuses for hundreds of executives - originally slated at $87 million in total - were reduced by a U.S. bankruptcy judge to $16.5 million. Until the current bankruptcy action is final, it may not be known if bankruptcy-emergence bonuses will be paid.
Photo by Delphi
Delphi executive chairman Steve Miller (courtesy Delphi Corp.
LEAVE A COMMENT
In November of 2005, one month after the declaration of bankruptcy, per Fidelity, Delphi
authorized through New York State Bank to sell off all Delphi Stock in the 401k accounts
of the Salaried of Delphi. Guess what happened? All the stock in the 401k accounts was sold at a price of $00.22 per share. When asked of Fidelity in 2006 how they could do this,
they said that they were directed by New York State Bank. "Who put up the money I asked?"
Fidelity said Delphi. My account lost $100K in 2005. Had I known after surgery, etc. that
my account had been all but sold off, I could have sold the rest and claimed all of it in one
year, per the IRS. Unfortunately, not only did Mr.Miller gather together a lot of stock cheap,
but because we were not advised of the sell off or of the need to sell all of the 401k off, another $44K was lost in taxes. Thanks Mr. Miller. Why don't you go ahead and take away
our benefits and pensions as well? Oh, You Are?
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