Report: GM In Talks To Take Back Delphi Plants

DETROIT (AP) -- General Motors Corp. is in talks with its former parts arm Delphi Corp. about taking back some Delphi factories that make key parts for GM vehicles, a person familiar with the negotiations said Monday.

Troy, Mich.-based Delphi has been operating under Chapter 11 bankruptcy protection for more than three years, and like many suppliers is struggling with the shrinking U.S. auto market. The person said GM is worried that the plants could shut down if Delphi runs short of cash, crippling GM's production.

The person, who asked not to be identified because the talks are private, said the talks have been under way for several weeks and may not lead to any takeover of the plants. GM has had the option to take back factories in its 1999 agreement to spin off Delphi as an independent parts supplier.

Delphi plants make thousands of key parts for the Detroit-based GM's vehicles including its top selling pickup trucks, the Chevrolet Silverado and GMC Sierra.

The interests of the two companies remain intertwined because Delphi is GM's biggest supplier, providing more than 1,000 parts for GM pickup trucks.

Delphi spokesman Lindsey Williams said Monday that the company continues to be in talks with GM -- as well as Delphi's debtor-in-possession lenders -- as it works to emerge from bankruptcy protection, but will not disclose the nature of those discussions.

The company has been trying to sell off plants it has defined as "noncore," those that make that make brakes, chassis, instrument panels, door modules and steering components.

Williams said Delphi is "well on its way" to reaching its post-bankruptcy protection goal of eight U.S. plants. It was not clear how many plants Delphi operates now,

GM shares slipped 5 cents to $2.79 in morning trading Monday.

Delphi has been operating under Chapter 11 protection since October 2005. It was forced to redraw its reorganization plan after a group of investors pulled out of a deal last spring that would have allowed it to emerge from court protection.

Attorneys for the company have said that it needs to re-examine its plan in light of the significant turmoil that has hit the capital markets, the auto industry and the overall economy since its last revision on Oct. 3.

The company last week asked a bankruptcy judge to allow it to cancel health care and life insurance benefits for 15,000 current and future salaried retirees, citing the steep downturn in the overall auto industry in recent months.

The talks with Delphi come as GM executives work day and night assembling a plan to show the federal government how the struggling auto giant can become viable and justify up to $13.4 billion in government loans.

GM is expected to announce multiple plant closures on or before the Treasury Department's Feb. 17 deadline for the viability plan, and officials with the United Auto Workers union are worried that several parts stamping, engine, transmission and vehicle assembly plants could get the ax.

Last summer the company announced it would close four truck and sport utility vehicle assembly plants in Moraine, Ohio; Oshawa, Ontario; Toluca, Mexico; and Janesville, Wis.

But that was before the U.S. auto market shrunk from an annual selling rate of around 16 million vehicles to 13.2 million last year with predictions for a rate as low as 10.5 million this year.

Plus, industry analysts note GM closed only one parts stamping plant near Grand Rapids, Mich., and no engine or transmission factories, especially those that make parts for slower-selling pickups and SUVs.

Even with the Grand Rapids closure, GM still has far too much parts stamping capacity. Also, because of reduced sales, GM is operating several assembly plants at a slow line speed, which analysts say is not cost-effective.

Assembly lines at the Pontiac, Mich., truck assembly plant, and Orion Township, Mich., midsize car factory are running at speeds far below their capacities, and their products are made elsewhere, causing worries that the plants could be closed.

"We always worry, especially after the national contract, where there was no future product put out there," said Mike Dunn, bargaining chairman for the UAW local at the Orion Township.

GM also is considering further white-collar job cuts on top of the 3,460 who took buyout and early retirement offers last fall. While the number exceeded the target of 3,000, the company said it would have to make further cuts as the U.S. auto market worsened, perhaps with only standard severance packages.

AP Auto Writer Bree Fowler in New York contributed to this report.

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Over capacity 2/9/2009 3:30:00 PM The auto industry will have to realign for a shift to fewer, smaller cars. Since you can stamp out smaller body panels in less space than it takes fro SUV panels, GM and other manufacturers will need fewer plants. The contraction is painful but necessary.
GM /UAW 2/9/2009 3:44:00 PM These cuts are several years too late ! Whats the UAW doing , stonewalling the process , again ? no wonder GM is broke --we need to let these bozos go to bankruptcy -and no more tax payer money !!!
I Agree... 2/9/2009 6:16:00 PM With "GM/UAW" above. All those bozos should just go bankrupt. The millions of people that are directly tied to the industry, and the other millions of people indirectly tied to the industry certainly don't need their jobs. Unemployment should surge to an unprecedented 20-30%. And since all Republicans seem to think the world spins on "Free Market", of course without any regulations to curtail their larceny, and part 2 "Supply and Demand" should kick in. So lets see, the 30 year Journeyman (or is that Journeyperson) welder, since there are no welding positions available (remember, huge supply of Labor, but low demand) can always be a greeter at WalMart! Or maybe he can go to that non-union Toyota plant. With his experience they'll be more than happy to start him out at $10.50 an hour. He's a couple more bucks over minimum wage because of experience. Remember, huge labor pool. Oh, and by the way, like all other Toyota employees, he's technically hired as Limited Term or Temporary, so he doesn't get any benefits, at least not for two years when he might "qualify" in their organization as "full time". Now since he's barely beating unemployment, he and his wife together each trying to work two jobs and take care of their three kids, can barely keep food on the table, certainly can't afford a mortgage any more, so they decide to sell the only thing they have of value; their home. But wait, there's millions of other people out there that are in the same position, and nobody can afford to buy their home!! It's forclosed, now they have nothing. They move into a small apartment, all five of them, in the not-so-great part of town. So now those millions of people don't make as much money, they can't pay taxes, so those that don't yet work for WalMart, but don't make quite enough to take advantage of those Republican tax loopholes, are taxed even more, effectively reducing them to poverty. Oh, wait, I forgot, poverty level is much lower now. Don't worry... you and I still have jobs... for now! And I bet you didn't utter a word when Republicans decided that the Government was holding banks back from prosperity in 2005 when they allowed banks to "invest" (i.e., loan out) 30 times their assets in marginal at best ventures, then allow them to call junkyard scrap Cadillacs. Bet you didn't say a word.
deadline for the viability plan 2/9/2009 6:21:00 PM How much you wanna bet that, no matter what plan GM comes up with or doesn’t come up with on Feb 17th, they don't get shutdown. Now they’re considering buying a bankrupt company they sold off years ago with who's money? Delphi has the same problems and the same mentality as GM. This can’t be a good thing. If this is part of GM's plan to survive... good luck with that.
Union stranglehold 2/9/2009 7:47:00 PM When will the unions learn they are killing the golden goose? Time and time aghain they force their employers to pay more in wages and benefits than the market will bear. They don't realize every business needs to run like a partnership. They need to be in it together. Historically they suck the blood-life out of their employers. How terribly sad! Worse, it undermines our country's economy. The goose is dead.
Not Exactly 2/9/2009 9:15:00 PM You can stamp out smaller body panels theoretically in a smaller plant, but that would entail buying smaller presses, instead of using the ones you now have...which is nearly as bright as giving bonuses to inept executives as the organization tanks! You would be able to use stock of an appropriate size of course, but you still need a press and dies, so you might as well go with the line of multi million presses you have. Overhaul as needed, they should still run 50 years, possibly more.

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