GM Talks Concessions for Reacquired Former Delphi Plants
By Bill Visnic January 19, 2010Even as it talks of the need to ramp up production at several U.S. assembly plants, General Motors Corp. is sending another message to the handful of former Delphi Inc. plants it "reacquired" as part of Delphi's departure from bankruptcy: costs have to be reduced.
The Detroit News reports today GM is seeking wage concessions from the United Auto Workers union workers who staff the components plants. The gambit likely was inevitable: GM spent billions to purchase the plants when Delphi exited its protracted bankruptcy late last year in order to assure the orderly delivery of vital parts - but GM reportedly is seeking to sell many, if not all of the facilities. The company already announced earlier this month it is selling the Nexsteer steering-components plant in Saginaw, MI.
The report that GM wants to reduce labor costs hardly is a surprise, then, as it brings these plants - and the thinking that originally created Delphi - full circle.
Prior to Delphi's inception, these plants were GM-owned facilities burdened by the same high labor costs as GM assembly plants. Delphi was created by GM in 1999 to spin off the plants under the aegis of an independent company in order to remove their typically money-losing operations from GM's balance sheet.
The strategy was an effective accounting ploy, but did not change the baseline problem: the plants largely were unprofitable.
Just after it exited from its own bankruptcy in July, it was reported GM was directly spending $3.5 billion to acquire five former Delphi parts operations in Kokomo, IN; Grand Rapids, MI; Rochester and Lockport NY and the Saginaw operations now known as Nexsteer.
GM also forgave a reputed $1.9 billion claim against Delphi, while it and the investment firm Platinum Equity Group formed a new company to acquire the remainder of Delphi's U.S. and international assets. The arrangement created two wholly-owned subsidiaries: GM Component Holdings LLC, which owns the Grand Rapids, Kokomo, Rochester and Lockport facilities, and Steering Solutions Services Corp., which owns the Nexsteer plant and numerous international steering-system manufacturing and engineering operations.
Labor concessions at the plants may improve their attractiveness to new investment, but GM likely still will find them a difficult sell in what currently remains a problematic auto industry and fluid investment environment. In effect, if Delphi could not operate the facilities profitably, the chances for a new owner to do so are not promising, irrespective of new labor-cost reductions.
In a press release earlier this month announcing its intention to sell the Nexsteer business, the company said, "GM recognizes the value of the global steering and driveline operations and seeks to realign Nexteer as a wholly independent entity, thus better positioning its business for growth among a wide range of global OEM customers." - Bill Visnic, senior editor
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