General Motors looking to sell back its steering business

Oct 12 2009 by John Cranage, Birmingham Post

General Motors will look to sell the steering business it took back from former parts subsidiary Delphi under a deal that closed this week, the car maker said in a letter to its suppliers.

GM, which spun off Delphi in 1999, bought back the component group’s global steering operations and its four other US plants under a plan to support its reorganisation in bankruptcy.

Delphi ended four years in bankruptcy last week by completing the transactions with GM and selling most of its other assets to bankruptcy creditors.

The former Delphi steering business – renamed Nexteer Automotive – has more than 6,200 employees and 15 manufacturing plants in North and South America, Europe and Asia. Its global revenues topped $2 billion in 2008.

“GM will re-evaluate its ownership of steering as industry conditions evolve,” Robert Socia, GM vice-president of global purchasing, said in a letter which was sent to suppliers and obtained by Reuters.

The letter reassures suppliers them that the car maker has no intention of competing with established component makers in a technology seen as key to meeting tougher fuel economy standards.

It also sends a message that as the auto market recovers, GM would be open to talks with a potential buyer for the steering business.

GM and Nexteer confirmed that the letter had been sent but declined to comment further.

While GM bought back the steering business to ensure a continued supply of crucial parts for its own operations, executives have told Nexteer staff that the car maker has no intention of remaining in the auto component business, two people with knowledge of those discussions have said.

Nexteer Automotive’s customers include GM, Fiat SpA, Ford, Toyota, Chrysler, PSA Peugeot Citroen, as well as manufacturers in India, China and South America. Sales to GM account for almost half of its sales.

“GM will use great care to ensure enterprise stability and supply continuity under any scenario,” Mr Socia said in the letter. “GM’s goal is to ensure Nexteer remains in the field of selection for automakers around the world.”

GM remains Delphi’s biggest customer and Delphi is GM’s biggest parts supplier.

GM, which has taken over $11 billion in charges for Delphi’s restructuring, has agreed to $1.1 billion in Delphi’s obligations and waive $2.15 billion in claims against the supplier.

The company also plans to invest $1.75 billion and to provide Delphi with loans.