Tags: gm | bailout | spreading

GM Bailout Spreading to Private Investors

By Dan Weil   |   Tuesday, 09 Jun 2009 01:19 PM

Dan Weil

You would expect that all the taxpayer money General Motors is receiving will go toward making new cars.

That’s not always the case.

GM will spend more than $2.5 billion, for instance, to help finance Platinum Equity’s $3.6 billion buyout of bankrupt auto parts maker Delphi, according to a source cited by The Wall Street Journal.

That $2.5 billion investment comes as the government forks over another $30 billion to GM as part of its bankruptcy restructuring. Uncle Sam had previously given GM $20 billion.

A GM spokeswoman said in a statement that the money for Delphi was "incorporated into GM's revised viability plan," The Journal reports.

Delphi was once owned by GM and provides parts for many of its cars.

The parts maker has been in bankruptcy proceedings for three years. GM has spent plenty to keep it afloat and earlier in the year said it no longer wanted to do so.

Thus the government may have pushed for GM’s investment in the buyout.

This would mark the first time the White House has used a private equity firm to assist in the auto bailout. The firms have participated in bank takeovers.

Some experts question Obama’s economic intervention, and even those who support it say an exit strategy must be produced soon.

Xerox CEO Anne Mulcahy, a former Obama adviser, told NBC’s Meet The Press, “I think there’s a need for an exit plan. …. This has to be thought through.”

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Dan WeilYou would expect that all the taxpayer money General Motors is receiving will go toward making new cars.That’s not always the case. GM will spend more than $2.5 billion, for instance, to help finance Platinum Equity’s $3.6 billion buyout of bankrupt auto parts maker...
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