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THURSDAY, FEBRUARY 1, 2007
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Delphi plant
sale nearer

California investment group is
favored bidder in contest for bankrupt steering division, Limestone facility

By Eric Fleischauer
eric@decaturdaily.com 340-2435

If all goes as expected, Limestone County's 1,300 Delphi employees will soon work for a Beverly Hills, Calif.-based investment group.

Platinum Equity LLC is Delphi's favored bidder in a contest over bankrupt Delphi Co.'s steering and halfshaft division, which includes the Limestone County facility that until recently employed more than 2,000.

United Auto Workers Local 2195 President Terry Scruggs, who recently retired from Delphi pursuant to a buyout package that lured hundreds, said he was thrilled to hear of Platinum's interest.

"If you look at what's going on at Delphi, you've got two scenarios," Scruggs said.

"They sell you, or they close you. I'd rather them sell us than close us. It's not a pretty situation."

According to Platinum Senior Vice President Mark Barnhill, negotiations with Delphi over its bid are not finalized.

But if they are successful, he said, Delphi will ask the bankruptcy court to recognize Platinum as the lead bidder, or "stalking horse."

As stalking horse, Platinum is still vulnerable to competing bids. If the bankruptcy court chooses another suitor, however, Platinum has a right to compensation for expenses related to its bid.

Barnhill would not reveal the amount of the bid. An industry publication placed it at $560 million.

He said he could not predict when Delphi would seek court approval, assuming negotiations are successful. He also had no comment on how the acquisition would affect local employees.

"It's too early in the process to talk about the operations plan for the business. That will evolve over time after the transaction is completed, in consultation with the management team, the UAW and a variety of other stakeholders," Barnhill said. "Now we're just working through the acquisition."

Platinum has acquired more than 65 businesses since it was founded in 1995, but not many are in the automotive sector.

"We really are not so much sector-focused as we are business characteristics-focused," Barnhill said. "We think that if certain characteristics are present in a business, we can create value. We have a pretty strong track record of moving into new markets, establishing a platform company and then succeeding."

Platinum said it would retain Delphi Steering President Robert J. Remenar if the court accepts its bid.

Barnhill said he did not expect significant opposition from other bidders once its stalking-horse status is established in bankruptcy court.

"This is an acquisition opportunity that is pretty well known out there," Barnhill said. "It would be hard for me to foresee a major new player in this."

In March, Delphi submitted a restructuring plan to the bankruptcy court that called for closing or selling of 21 of its 29 U.S. plants, including the one in Limestone County. Delphi, which spun off from General Motors in 1999, filed for bankruptcy in October 2005.

The Limestone County plant is part of a Delphi steering division that employs 10,000 in 22 plants worldwide, according to Delphi spokesperson Cheryl Kilborn.

Half of those employees are in two U.S. facilities, Limestone County's and a larger one in Saginaw, Mich. The rest are outside the United States.

Foreign plants

While the bankruptcy solely includes U.S. operations, the sale would include steering-division plants in Europe, South America, Mexico, India, China, Japan and South Korea.

Before Delphi declared bankruptcy, it had moved the Limestone facility into a corporate division separate from the steering division because of its financial problems.

Once it decided the steering division was on the selling block, it moved the plant back to that division. The Limestone County plant is included in the Platinum bid.

According to reports, Platinum's main competition for its lead position was Cerberus Capital Management. Cerberus was one of three groups that proposed investing billions in Delphi, which means it would have a substantial ownership position in the company when it exits bankruptcy.

Labor agreements

The investment proposal was conditioned, however, on Delphi reaching labor agreements with UAW and supply agreements with General Motors by Wednesday. Under the terms of the proposal, in the absence of those agreements, Delphi, Cerberus and the other investors can withdraw from the deal.

The steering business booked $3.3 billion in revenue in 2005. In 2006, it contracted $3.4 billion in new business.

"This is the company we feel is in the lead in the bidding process," said Delphi's Kilborn. "This is who we think will bring the most value to the (bankruptcy) estate."

If the court approves Platinum as the stalking horse, it will make public the terms of its bid and open the steering division up for bids from other companies.

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