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Tuesday, July 19, 2005

The auto industry in a crash course

American OEMs and suppliers struggles are such that every possible buyer is a good buyer. Now Visteon and Delphi are courting private equity firms. However the union issue is not easy to solve even for private equity's hardball tactics. As an investor i would not touch (equity or debt) this losing American players.

TheDeal.com - PE firms in the driver's seat: "Meanwhile, struggling auto parts giants Visteon Corp. and Delphi Corp., spun off from Ford and General Motors Corp., respectively, have each hired J.P. Morgan Chase & Co. to advise on the restructuring of their businesses, and private equity firms have held informal talks about investing in both companies.
While buyout firms have invested heavily in parts suppliers in recent years, carmakers historically have been suspicious of buyout firms, sometimes even shunning suppliers owned by them. But the Hertz auction and the feelers by Visteon and Delphi, coming on the heels of three other buyouts of Ford and GM units over the past six months, mark a turnaround in Detroit's attitude to private equity.
In January, GM sold its locomotive subsidiary, Electro-Motive, to Greenbriar Equity Group LLC and Berkshire Partners LLC for less than $500 million. In March, GM confirmed that it was exploring a sale of a stake in GMAC Commercial Mortgage Corp. In April, Kohlberg Kravis Roberts & Co., Goldman Sachs Capital Partners and Five Mile Capital Partners placed a $1.3 billion bid for 60% of the lending unit and have been conducting due diligence.
In May GTCR Golder Rauner LLC and Goldman Sachs Capital Partners bought Ford's subprime lender, Triad Financial Corp., for $2.4 billion.
'A year ago, they would not even meet with us; now the door is open any day of the week,' a sponsor at a major private equity firm said. "

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