GM, Private Equity Firm Rebuffed in Delphi Bid

GM, Private Equity Firm Rebuffed in Delphi Bid

Something strange happened on the way to bankruptcy court Monday morning: General Motors Co. and private equity firm Platinum Equity LLC lost out on a seemingly done deal to acquire the assets of long-bankrupt auto-industry mega-supplier Delphi Corp.

The Wall Street Journal reported that several investment funds that owned some $3.4 billion in Delphi debt chose to forgive that debt in a bid to retain Delphi's assets rather than see them auctioned to GM in a procedure that largely would have resembled the recent Chapter 11 bankruptcy restructuring GM itself undertook.

GM and Platinum Equity seemed to have the inside track with the government for their bid to pay about $3.6 billion for Delphi in a deal that would have seen many of Delphi's parts-making operations returned to original owner GM.

The WSJ reported that a judge ordered Delphi to consider the plan of the lenders who own Delphi's debt and the Delphi board of directors approved the proposal. A ruling is expected on Wednesday.

GM, which in some fashion relies on Delphi components for almost all of its vehicles and whose deal with Platinum Equity would have given it nearly complete control of Delphi's operations, did not appear distressed by the abrupt change of course.

In a statement, GM said the new deal "provided better economics to GM than that from Platinum Equity," and that "GM supports this bid, which is still subject to Delphi bankruptcy court approval and we are pleased that Delphi is now positioned to move forward in its restructuring."

In its deal with Platinum Equity, GM had planned to directly take over several major Delphi operations -- including the company's vital steering-systems development and production -- and the WSJ reports that still is likely to happen if the original Delphi debt holders' bid is approved on July 29. -- By Bill Visnic

Michelle Krebs:  is Editor-in-Chief of AutoObserver.com. Follow @AutoObserver on Twitter.