GM and Delphi to try again in Kokomo

kirven.jackson@ kokomotribune.com

Last week, before entering Chapter 11 bankruptcy on Monday, General Motors Corp. purchased five Delphi Corp. plants: One in Kokomo, two in New York and two in Michigan.

GM will expand an additional $250 million in financing to the Troy, Mich.-based auto supplier.

Furthermore, the deal includes GM assuming additional retiree pension and health-care obligations from Delphi.

Yet, with one bankrupt business buying another preparing to emerge from almost four years of bankruptcy, Ginny McMillin, president of Delphi's UAW Local 292, hopes the automaker's action is a "good move" for her fewer than 1,000 rank-and-file employees in Kokomo.

To the average person, GM's move, which is financed by loans from the U.S. government, may not make much sense - common, business or otherwise. However, Tuesday, automotive analysts were applauding GM's decision and Delphi's operations in Kokomo.

"No one can guarantee a good relationship, but this is very good for GM and Delphi," said Morton Marcus, an economist and formerly with the Indiana Business Research Center for the Indiana University Kelley School of Business.

"GM must see Kokomo is a reliable and viable plant producing very important components for the new vehicles [GM wants] to build.

"It's very good news for Kokomo. It shows Delphi will have a future in Kokomo. [GM is] keeping the most productive parts of [Delphi]."

Monday, Parnassus Holdings II LLC, an affiliate of Platinum Equity, purchased much of Delphi's U.S. and foreign operations for $3.6 billion.

In a statement, Delphi indicated its remaining "non-core" operations will be sold or discontinued at a July 23 hearing.

Not only is Delphi GM's largest supplier, it's also the supplier that would have seen the biggest financial return in GM's bankruptcy.

Delphi, with a claim of $110 million, tops the list of suppliers who are owed money by GM. The proposed deal between the companies would eliminate that debt.

Delphi's Kokomo manufacturing facilities produce powertrain control modules, safety and power electronics, hybrid controllers, pressure sensors, semiconductors, body computers, direct-ignition systems and ceramic-printed circuit boards.

The products are purchased by GM, Toyota, Ford and Harley-Davidson.

Making equipment GM plans to use once it leaves bankruptcy is "very important in GM and Delphi going forward," said Bill Visnic, senior editor of AutoObserver, which is affiliated with the automotive analyst firm Edmunds.com.

"Delphi has very sophisticated safety systems which are a key component to not only GM but other car companies," continued Visnic. "They also have a higher level of sophisticated 'info-tainment' options that are important to the consumer who wants the latest electronics in their vehicle. The combination with Delphi will make GM have a stronger portfolio as it goes forward to its new future."

Until Delphi spun off from GM in 1999, their futures were interlocked.

As a result, when GM announced its decision to buy back five Delphi operations, "there was a number of considerations," said Julie Gibson, GM spokeswoman. "The No. 1 consideration was if the parts manufactured were part of a critical supply source for GM and if [the Delphi plants GM plans to purchase] formed part of Delphi's core strategy.

"We also looked at if [the purchased plants] would be included in the new future of Delphi, whatever form it takes: Disposed of one way or another. When it was not part of [Delphi's] core strategy and they made important parts for GM, it made sense to acquire them."

While the neophyte GM-Delphi relationship is still developing, Jeb Conrad believes it will be a good "partnership" between the two automotive companies and Kokomo.

"The research and discovery technology Delphi has has a huge value to GM. That is extremely beneficial to Kokomo," said Conrad, president and CEO of the Greater Kokomo Economic Development Alliance. "They have a historic relationship. The synergy already exists and there's a value to that as well. GM's decision says a lot about Delphi's facilities and its workers. They are both in the best position to move forward for the long term.

"I feel real positive about their future. It can open doors to other potential relationships."