DETROIT (Reuters) – General Motors Corp (GM.N) said on Tuesday it would purchase Delphi Corp’s (DPHIQ.PK) steering business and accelerate payments to Delphi in order to shore up the former parts affiliate’s liquidity.
Delphi, which filed for bankruptcy protection in 2005, said it was in default of its already amended credit facility, and the additional support from GM would give the company liquidity needed to survive through May 2009.
GM, which itself is fighting to avoid bankruptcy and has requested up to $30 billion of government loans to survive the industry downturn, has agreed to increase from $300 million to $450 million the amount it is committed to advance to Delphi.
GM also plans to exercise an option to buy the supplier’s steering unit under an existing agreement reached in September 2008, after Delphi terminated a deal to sell the unit to private equity firm Platinum Equity LLC.
Both agreements are subject to U.S. Bankruptcy Court approval as well as to review before March 24 by the auto task force assigned by President Barack Obama.
GM aims to close the transaction by April 30.
GM and Delphi remain in talks aimed at shifting parts plants that mostly supply components for the automaker back to GM, both sides said.
Under that still-developing deal, Delphi expects to get a further payout from GM that it could use to help it emerge from bankruptcy, it said on Tuesday.
GM, which spun off Delphi in 1999, has taken more than $11 billion in charges to help along Delphi’s reorganization.
A person with direct knowledge of GM’s ongoing talks with Delphi said the discussions concerned the transfer of more than four North American facilities back to GM.
Such a deal would leave a reorganized Delphi even more strongly focused on its operations outside the United States, where GM remains its largest customer, the person said.
GM said last month its aid request pending before a panel of officials led by U.S. Treasury Secretary Timothy Geithner included funding it expected to need to complete such a deal.
Delphi is struggling to exit from bankruptcy after investors led by Appaloosa Management backed out of a $2.55 billion plan to support its emergence last April.
Also on Tuesday, Delphi said it lost $1.84 per share in the fourth quarter on sales of $3.2 billion.
(Reporting by Soyoung Kim and Jui Chakravorty Das in New York, editing by Gerald E. McCormick and Andre Grenon)