Bankrupt General Motors will give more than $2.5 billion to Platinum Equity to finance the acquisition of auto parts company Delphi Corp.
"Flush with $30 billion in new capital from the US government, General Motors Corp has agreed to finance a private equity firm's buyout of bankrupt auto-parts company Delphi Corp," The Wall Street Journal has reported.
Quoting a person familiar with the matter the daily said, General Motors would provide more than $2.5 billion of the $3.6 billion necessary for the private equity firm to gain control of Delphi.
General Motors filed for bankruptcy protection on Monday.
"Since Monday, GM and the government have been mum about who would provide the money to help Delphi emerge from bankruptcy," the report said.
Under the terms of the transaction, Platinum would invest no more than $750 million, while the bankrupt car maker GM would provide the balance in financing. Delphi, a former unit of GM, has been bankrupt since 2005.
The company said funding for the Delphi buy out was "incorporated into GM's revised viability plan. . ."
"As part of the deal, GM is buying back four Delphi plants and Delphi's Saginaw, Mich, global steering division. In addition, it is providing a $250 million loan to fund Delphi's operations while it remains in Chapter 11," the report said.
The Platinum deal needs to be approved by the bankruptcy court, as part of the Chapter 11 filing. "If the company doesn't get that support, it will try to complete the transaction through a sales process under the US Bankruptcy Code," WSJ quoted GM as saying.
GM's involvement represents new ground in its use of government support. The Obama administration has begun to use private equity firms to take over failed banks but has yet to use them in the auto industry.
On Monday, the world's biggest car maker GM had filed for Chapter 11 bankruptcy protection in a New York court, making it the third biggest bankruptcy filing in the history.
The company is expected to get $30 billion from the US government as part of the Barack Obama administration's restructuring plan for the iconic auto giant.