Delphi's Troubles Prick GM (GM) Balance Sheet

GM (NYSE: GM) would rather not put money into its former parts operations which is now a separate company and in Chapter 11. Because of tight credit markets, the large auto company has agreed to offer up $2.8 billion in loans as part of a $6.1 billion package to get Delphi out of bankruptcy.

Some of the other investors in Delphi, led by Appaloosa Management, do not want GM to make the investment unless they can approve the terms. According to Reuters "Jack Butler, a lawyer for Delphi, told U.S. Bankruptcy Judge Robert Drain that there is nothing in the agreement with the planned investment group that bars the stepped-up role of GM in the financing."

The matter may be been partially settled when the judge said that the investment partners could not walk away from the Delphi deal because of GM’s role in the financing. That should open the way for Delphi operate on its own within a month.

GM would almost certainly rather avoid the situation all together. Given its own problems in North America, loaning money is not high on its "to do" list. But, without parts from Delphi, GM could be shut down in a matter of weeks.

The debt for Delphi is the lesser of two evils.

Douglas A. McIntyre