By Jeff Green/ Bloomberg
Shanghai: General Motors Corp., the world’s largest automaker, said an agreement for Delphi Corp., its largest parts supplier, to exit bankruptcy is still possible even as a prospective investor will likely not participate.
“We’re optimistic. This is part of the process to hopefully bring it to a resolution,” said GM’s chief executive officer, Rick Wagoner, in an interview in Shanghai.
GM faces an increased risk of a strike that could cripple U.S. production after Delphi Corp. Its exit from bankruptcy will be delayed because Cerberus Capital Management LP is likely to drop out of a plan to invest $3.4 billion (Rs1,42,636 crore) for control of the company. Negotiations with Cerberus’s four partners in the offer, including Appaloosa Management LP will continue, Troy, Michigan-based Delphi said on 19 April.
Delphi, which had intended to emerge from court protection by mid-year, expects to file a reorganization plan by 31 July and leave bankruptcy later this year. The delay may put more pressure on GM, Delphi’s former parent, to offer additional financial aid.
New agreements must be reached to cover Cerberus’s half of the investment. The automaker spun Delphi off in 1999 and still uses the company as a source for air bags, anti-lock brakes, steering components, air conditioners and other parts. GM agreed as part of the spinoff to cover retirement costs for former GM workers if Delphi couldn’t afford the expenses.
“We still think a deal is possible,” said GM chief financial officer Fritz Henderson in an interview in Shanghai. “GM is still committed to be a part of trying to find a solution to Delphi’s exit.”
Highland Capital Management LP, a rival bidder and the parts company’s second-largest shareholder, said om 19 April that it asked to meet with Delphi’s board and make a new proposal. Highland offered to invest $4.7 billion in December.
Cerberus has been reconsidering its offer because it doubts Delphi can generate enough profit to make the investment pay off, people with knowledge of the negotiations said this week. The doubts surfaced after a four-month study of Delphi’s business.
The Detroit-based automaker said on 25 October it expects the pretax costs for the Delphi bankruptcy to range from $6 billion to $7.5 billion and has already set aside $6 billion for those obligations. GM said it may have costs outside of the retirement obligations of no more than $400 million pretax after Delphi emerges from bankruptcy next year.