GM board votes to distribute its remaining stock in Delphi

Journal Record, The (Oklahoma City), Apr 13, 1999

DETROIT (AP) -- General Motors' board voted Monday to distribute the automaker's remaining stock in its big Delphi Automotive Systems parts unit to GM shareholders next month, completing the subsidiary's spinoff as an independent company.

GM sold nearly 18 percent of Delphi in an initial public offering in February at $17 a share. The tax-free spinoff is expected to be completed with the distribution of 80 percent of Delphi shares worth $7.8 billion on May 28. The other 2 percent of shares are expected to fund a trust for retiree benefits.

Delphi is the largest auto parts manufacturer in the world, followed by Ford's Visteon Automotive Systems, and Johnson Controls. The spinoff marks a drastic shift away from GM's history as a vertically integrated automaker that made its own parts and assembled them into cars and trucks. GM executives say the split will allow Delphi to expand its business and form relationships with other automakers that have been reluctant to work with a supplier owned by one of their competitors. GM is expected to remain Delphi's largest customer well into the next decade, but the spinoff will allow the world's largest automaker to turn to lower-cost, independent suppliers for more of its parts. "We believe that both companies will become stronger and more competitive in our respective businesses," GM Chairman Jack Smith said. Monday's vote was expected, though GM had previously said only that the spinoff would occur before year's end. By spinning off the rest of Delphi before summer, executives expect GM will be better- positioned to negotiate a separate contract with its largest union, the United Auto Workers, in the fall. But the timing is unlikely to please UAW leaders, who have publicly opposed the deal. The union represents 46,000 of Delphi's 198,000 workers; they currently are under GM's national contract. UAW President Stephen Yokich had urged GM to retain at least 51 percent ownership of Delphi, fearing wages of Delphi workers will suffer once it is fully independent. The UAW is expected to push for Delphi's contract to be the same as what GM negotiates for its workers. The union also is worried about what an independent Delphi may do with its U.S. plants that it considers unprofitable or noncompetitive. UAW leaders have long argued that GM has not invested in those plants to make them competitive with independent suppliers.