General Motors:
Delphi and the UAW - July 14
Delphi will likely need additional financial support.
Delphi (DPH) will likely need additional financial support:
"DPH (B3/B-) is GM's largest auto parts supplier. Its credit condition
has seriously deteriorated and although DPH arranged $2.8 billion in
credit facilities in June, we believe it will need additional financial
support relatively soon.
The UAW and GM could be motivated to help DPH:
"Both the UAW and GM could be motivated to help DPH, in our view. Both
DPH and the UAW might want GM to provide various forms of assistance to
DPH such as a loan and/or a commitment to take over responsibility for
certain UAW employees. In return, the UAW might be willing to make significant
concessions to DPH (e.g., early retirement, plant closings, health care), and
to GM (e.g., health care).
Much uncertainty remains:
"However, much uncertainty remains. We still consider a re-opening of
GM's UAW contract to be unlikely before 2007 and, therefore, we believe
substantial health care cuts to be unlikely in the near term. Negotiations
could break down and possibly lead to a bankruptcy filing of DPH.
We maintain an "Underperform":
"We maintain an Underperform on GM. Investors should consider whether
GM/GMAC bonds are appropriate investments or whether reducing/eliminating
positions is warranted given their risk tolerance profile."
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