Published: February 10, 2009 12:32 am      

BAILOUT: GM may be considering taking back Delphi

General Motors Corp. could be in discussions with Delphi Corp. about taking back some Delphi factories, which could include its Lockport plant.

A person familiar with the negotiations told The Associated Press and the Wall Street Journal on Monday that the talks have been under way for several weeks and may not lead to any GM takeover. Four other plants might be involved.

Delphi has been in discussions with GM and other lenders as it works toward exiting Chapter 11 bankruptcy protection, which it has been in since October 2005.

Wary that Delphi Corp.’s financial woes could interrupt parts supplies and further cripple the automaker, GM is in talks with its former parts arm about taking back some Delphi factories that make key parts for GM vehicles, a person familiar with the negotiations said Monday.

Despite the announcement, there are fears spreading through General Motors Corp. and Chrysler LLC of more plant closures and other cuts that are likely to cost thousands of jobs as the companies approach a Feb. 17 deadline to show the government they can be viable.

Both companies’ plans are presumed to include concessions from bondholders and the United Auto Workers. GM’s plan will include shuttering additional factories as well as salaried pay and job cuts, according to people familiar with the plans.

Both GM and Chrysler must prove to the government that they are able to repay the federal loans that are keeping the companies afloat in the worst U.S. auto sales climate in 26 years. GM has received $9.4 billion and expects to get $4 billion more, while Chrysler has received $4 billion and is hoping to get another $3 billion.

That means the automakers will have to make substantial cost cuts. The companies are required to show the government they can achieve “positive net present value,” which means that the present value of a company’s expected net cash flows exceeds the initial investment in the company.

If GM were to take some plants back from Delphi, it could help GM gain more support beyond the $13.4 million the federal government is giving the struggling automaker.

Delphi spokesperson Claudia Piccinin said the company would not comment on the Wall Street Journal story, speculative reporting or release details about the discussions, which have been ongoing since December.

“We are not commenting on it,” she said. “As has been our policy throughout the Chapter 11 cases, specifics of such discussions are not publicly disclosed.”

The Lockport Delphi plant employs more than 2,100 people.

Spun off of GM in 1999, Delphi is an independent parts supplier that makes more than 1,000 parts for GM-based vehicles, including its top selling pickup trucks, the Silverado and Sierra. GM has the option to take back factories in its 1999 agreement.

Delphi spokesman Lindsey Williams said Monday that the company remains in talks with GM and Delphi’s debtor-in-possession lenders as it works to emerge from bankruptcy protection, but will not disclose the nature of those discussions.

GM is Delphi’s largest customer, while Delphi is GM’s largest supplier. Delphi has said it plans to have no more than eight plants operating in the U.S.

GM workers across the country are dreading Feb. 17, the date that some of the plan’s details could become public. Many realize that GM has announced the closure of four pickup truck and SUV plants in the past year, but it hasn’t shut down a corresponding number of the engine, transmission and parts stamping factories that feed the assembly lines.

“They’ve been putting most of their efforts into cutting back on big production, but they haven’t made the corresponding cuts in powertrain production,” said Mike Omotoso, senior manager of global powertrain for J.D. Power and Associates.

GM Vice Chairman Bob Lutz, in an interview with The Associated Press on Monday, wouldn’t give details but conceded that GM will have to get smaller in the U.S. before it can grow again.

“It’s going to be a smaller company in the U.S.,” he said, adding that GM will grow in other parts of the world such as China. “We may have to take a step back in General Motors to find the right-sizing that’s going to permit a profitable existence in a much smaller market.”

GM is to hold a big meeting of its bondholders as early as this week, while the union has been waiting to see what concessions other parties make before agreeing to anything.

A so-called car-czar will ultimately decide on the companies’ viability, but that person has not yet been appointed by the Obama administration. There also has been talk in Washington of extending the auto companies’ deadlines.