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GM to draw government funds for Delphi costs, source says

October 28, 2009

General Motors Co. will announce later this week that it will draw from its government funding to pay the cost of buying a chunk of troubled parts supplier Delphi Corp., a person briefed on the company's finances said Wednesday.

GM has agreed to pay several billion dollars to fund Delphi's emergence from bankruptcy protection by buying an equity stake in a new Delphi, purchasing Delphi's global steering business and several of its factories.

Delphi employs about 4,000 people in Kokomo.

Details will be disclosed in a filing Thursday or Friday with the Securities and Exchange Commission, said the person, who asked not to be identified because the paperwork has not been filed.

GM has received $52 billion from the federal government. It will draw on the roughly $33 billion in government money allocated to run GM after it left bankruptcy protection in July.

GM CEO Fritz Henderson told The Washington Post on Wednesday that the company would not need further government aid.

The person said the money isn't being drawn to fund GM's day-to-day operations, but would not give details of how GM is paying its bills.

The automaker, which is 61-percent owned by the government, plans to release details of its finances in November.

Troy, Mich.-based Delphi, once GM's parts division, was spun off in 1999 as a separate company but was forced to file for Chapter 11 in October 2005. It still produces about 10 percent of the parts used in GM's global manufacturing, and its components go into nearly all of GM's North American production lines.

Delphi emerged from bankruptcy protection on Oct. 6 as a new company after completing a deal with its lenders and receiving a promise for billions in loans from GM. Delphi's survival ensures a steady stream of critical parts to GM.

As part of the deal, GM agreed to buy an equity stake in the new Delphi. It also agreed to take back some of Delphi's businesses, including its Saginaw, Mich., steering operations and parts manufacturing facilities in Lockport and Rochester, N.Y., Wyoming, Mich., and Kokomo.

GM also will contribute billions in aid to help finance the deal.

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