Delphi Bankruptcy

The Detroit News has lodged another exhibit in the attempt to reconstruct how General Motors used an ignition switch part that might not have met the company's own standards, citing acrimonious relations between it and parts supplier Delphi just after the turn of the millennium. The short story alleges that that Delphi made a part that wasn't up to scratch, but the long story is about why Delphi may have done such a thing and why GM would have accepted it.

Until 1999, Delphi was a division of GM, but an initial public offering for the auto parts unit made it a separate company and had everyone crowing about the benefits the move would accrue to all parties. According to The Detroit News piece, three years later, Delphi still couldn't get by without GM's money, but The General was treating it like any other supplier and squeezing it for cost savings with some truly Machiavellian tactics that many powerful purchasing department heads would file in the drawer marked, "It's Just Business." The occasional consequence was "suppliers bidding so low that they had to cut corners to meet the promised price."

Why wasn't the problem caught and stopped even though GM might have known about it? Again, according to the report, fixing the part meant production delays, but Old GM's contract with the United Auto Workers included a provision for job banks, which meant that workers had to be paid whether or not lines were running. Idling factories to fix the part would obliterate all the savings gained by hammering down the price, an outside analyst saying of such moments, "There were unquestionably times when parts were accepted that did not meet GM's specifications. But you had to keep the production lines running at all costs." None of it ended up helping Delphi, either: the company, already in "a low- or no-margin business" and saddled with heavy legacy benefits from its GM days, declared bankruptcy in 2005 and didn't exit it until 2009.

Head over to the DetNews for the full skinny on this new wrinkle to GM's ongoing recall nightmare. It's a compelling read.