Delphi wants GM to bail them out

I read in the paper where Delphi wants GM to give them $6 billion to keep them from going into bankruptcy. The average guy might think that sounds like a hand-out or even extortion. Delphi has been losing money (or so they say) and GM needs them to keep making cars and trucks. Especially profitable trucks (SUVs)

Let’s look at a few things though that makes this make sense.

Delphi was once GM component plants. GM spun them off into a seperate company in 1999. Delphi made an IPO and their stock has stayed in the toilet ever since. Delphi stock was issued to GM stockholders as part of the spin-off. That makes GM and it’s stockholders a large percentage of the owners of Delphi.

In fact, GM controls Delphi. They have placed demands on Delphi for meeting lower costs, higher quality and shorter delivery times since the spin-off. They have in effect placed restrictions on Delphi that they couldn’t meet when it was directly owned by GM.

GM is squeezing every penny of profit out of Delphi and pocketing it.

Meanwhile, they left Delphi with a legacy of labor contracts modeled after those of GM’s assembly plants, where they enjoy the benefits of the lower cost parts supplied by Delphi. When they talk about Delphi’s high labor costs, remember these are set by the example of GM. (And every other US automaker.)

I could go on, but Delphi is really a paper company controlled by GM anyway. It’s autonomy, at least in direct component supply areas, is an illusion.

So what should they do? Bail out Delphi? Let them go Chapter 11? Buy Delphi back? I don’t know what would be best, but you can bet whatever they do will screw the little guy, the worker.

Posted in Work

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