Appaloosa Management, the largest investor in
bankrupt auto supplier Delphi, issued a stern warning late last week concerning the possibility of an upcoming deal
between the parts company and former parent company GM. The hedge fund owns nearly 10% of Delphi’s shares, and has
concerns about the short-term costs of such a deal, worrying that they will exceed the cost of simply paying workers
until the expiration of union contract next year.
Delphi’s shareholders have no seats on the bankruptcy court’s
equity-holder’s committee, which means that large investors such as Appaloosa have no say in the decisions that are
made in an attempt to return Delphi to profitability. Appaloosa is concerned that Delphi’s management will
“screw” (the word used by Appaloosa’s CEO) investors out of any previous stakes that were held in the
company, all while Delphi’s top guys walk away with 10% of the post-bankruptcy company. For its part, Delphi says that
the screwing already happened with the bankruptcy filing (I don’t think that Delphi specifically used the word
“screw”, although it’d be a breakthrough in honesty and straightforwardness if they did).