GM continues "Steering" through difficult times.
The old restructuring plans of General Motors came back to haunt it again this week as it was forced to re-acquire Delphi Steering from bankrupt Delphi Corp. Bob Remenar, president Delphi Steering, also says the steering company’s separate sales agreement with Los Angeles Platinum Equity has been terminated.
Delphi Steering, once known as Saginaw Steering Gear, will continue to operate as a stand-alone business and focus on the development of Electric Power Steering, a green technology that offers automakers increased fuel economy and reduced emissions, according to Remenar.
The electric power steering unit is critical to GM’s Chevrolet Volt and Opel’s Ampera, as well as almost all of GM’s other production models.
“In order to preserve the value of the steering business and continue to provide our global customer base with world class products and support, GM intends to exercise its right to acquire the global Steering business through a wholly-owned GM subsidiary,” Remenar says.
Steering does have a diverse customer base and “the ability to self-fund the operations will be essential to the business’ long-term future,” Remenar says.
It also plans to continue bidding for new business opportunities and technologies will continue to be aggressively pursued.
Although the steering business will — at least in the near term — be wholly owned by GM, “Steering will pursue new business opportunities,” says GM spokesman Dan Flores.
GM, desperate for cash, also hopes to sell the Steering business at some point in the future, though qualified buyers are difficult to find. GM, however, can’t afford to let the steering gear business fail without jeopardizing its entire product line.
Other makers also depend on Delphi Steering. Last year, it had sales of $2.1 billion and than 60 customers around the world. It has approximately 7,730 employees in 17 manufacturing plants, six regional engineering centers and 14 customer support centers located in North and South America, Europe and Asia.
GM expects the transaction with Delphi to close during the second quarter of 2009. Terms of the exercise agreement are not being disclosed at this time. In addition, GM has agreed to increase its advance agreement commitments from $300 million to $450 million to support Delphi’s near-term liquidity needs, effective March 24.
Delphi Steering was spun off in 1999 as part of GM’s ill-fated spin off of Delphi Corp. It has a 100-year history of innovation as well as comprehensive in-house design and development capabilities – which is unique to the steering segment of the supply base.
Delphi will submit its Annual Report on Form 10-K to the Securities and Exchange Commission (SEC) later today, which will include additional information concerning Delphi’s current liquidity outlook, the terms, covenants and conditions of its DIP financing facility and its accommodation agreement, as recently amended and supplemented, and its 2008 results. Additional information regarding Delphi’s DIP financing facility and the Accommodation Agreement (as amended and supplemented) can also be found on www.delphidocket.com and Delphi’s previous filings on Form 8-K with the SEC.