GM said to be in talks to reclaim Delphi plants

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http://news.yahoo.com/s/ap/20090209/ap_on_...5ru_7WJt0OyBhIF

By TOM KRISHER, AP Auto Writer Tom Krisher, Ap Auto Writer

DETROIT – 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.

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