Activist investor Carl Icahn is reportedly interested in taking another run at Delphi Corp. after a federal judge ordered the bankrupt auto parts supplier to open the sale of its assets to potential bidders, in addition to the previous offer from private-equity firm Platinum Equity.

Icahn's auto-parts company, Federal-Mogul Corp. (NASDAQ: FDML), had held discussions with Delphi, but the Presidential Task Force on the Auto Industry, which was set up by the Obama administration to oversee the restructuring of the U.S. auto industry, preferred the Platinum Equity deal.

This morning, The Wall Street Journal (subscription required) reported that General Motors (OTC: GMGMQ) has reached a preliminary deal to sell its Saturn distribution network to Penske Automotive Group. Penske is the second-ranked U.S. dealership group.

The Journal says that Penske will take over the brands, trademarks, service and parts operations, as well as the distribution operations related to the Saturn brand. The report also notes that Penske will make deals with other auto makers (one possibility is Renault SA) to purchase vehicles that will fill out the Saturn portfolio.

General Motors (NYSE: GM) is proposing it put up several more billion dollars to help auto parts company Delphi out of Chapter 11. At one point the firm was part of GM but was spun out to the public in a deal that shareholders must have come to regret.

With the car business operating under pressure from falling vehicle sales, parts suppliers are being squeezed to drop prices. This has made the Delphi situation worse.

According to Reuters, "Under the deal, which met quick opposition from Delphi creditors, GM would provide Delphi with a total of $10.6 billion in support, including the assumption of $3.4 billion in pension obligations for Delphi's factory workers."

GM is trapped. It needs the flow of products from Delphi to keep its plants running. It has contract obligations to Delphi's pension funds. But, GM is already running short of cash and may have to bring in more money next year, especially if auto sales worsen.

GM is now begging Congress for $50 billion in loan guarantees to upgrade plants for the Big Three. The idea is to finance a changeover to operations that would build more fuel-efficient cars.

But, GM may need the loans just to stay in business.

Douglas A. McIntyre is an editor at 247wallst.com.

Delphi was once the mighty parts operation at GM (NYSE: GM). It got to go out on its own with an IPO, and it has been trouble ever since. Because of contract obligations GM had with its former division, it has poured hundreds of millions of dollars into Delphi.

Delphi has been operating under Chapter 11 and trying, without success, to return to its role as an independent company. Now the collapse of the car business is likely to cause a liquidation of the entire firm.

According to The Wall Street Journal, "Delphi's bankruptcy financing expires at year end, and there are indications that its current lenders may balk at renewing it." Analysts might find it easy to say that Delphi is a microcosm of the car industry and that car companies are heading in a similar direction. That is not true. Delphi has operated under Chapter 11 for some time.

On the other hand, "G.M.'s vice chairman, Robert A. Lutz, said the car companies need money to retool their plants but probably cannot raise enough capital on their own because of the tight credit markets," according to The New York Times. That may be the first time that a top industry executive has indicated the industry may simply run out of cash.

The U.S. auto industry has not caught up to Delphi yet, but it is running toward the same place awfully fast.

Douglas A. McIntyre is an editor at 247wallst.com.

General Motors Corp. (NYSE: GM) is giving out another chunk of cash to its ailing and bankrupt parts vendor Delphi Corp. (OTC: DPHIQ). To exit bankruptcy status, Delphi said GM would increase its loan to $950 million from $650 million so that the auto parts supplier could maintain minimal liquidity.

Delphi, which almost had a savior in July when hedge fund Appaloosa Management LP was about to inject over $2.5 billion to assist it in reorganizing itself for a speedier exit from bankruptcy, is now suing the hedge fund for backing away from its earlier plan. When Appaloosa saw that the downturn in the U.S. auto market was here to stay, it closed its checkbook. But does that mean Delphi can sue it for changing its mind? It appears so.

With GM's recent $15.5 billion quarterly loss, it's becoming harder and harder to see how the American auto giant is going to survive as is. The loss just reported a few weeks ago was the third-largest ever in the history of the company, and $2.8 billion of that was tied to its joined-at-the-hip partnership with Delphi. Yet, there appears to be no ready alternative for supply parts for GM that is instantly usable. Delphi, which entered bankruptcy protection in October 2005, is now trying to emerge from that state almost three years later. GM still has no other partner for the majority of its parts. What else can go wrong for GM? Right now, just about everything.

MAJOR PAPERS:

• The market for private mortgage insurance has narrowed and is tougher to obtain, further pressuring home buyers and affecting the market, the Wall Street Journal reported. "Clearly, the pendulum had swung a little too far in terms of flexibility in underwriting," said Len Sweeney, the chief risk officer at AIG United Guaranty, a part of American International Group Inc (NYSE: AIG).
• In a agreement with Viacom Inc (NYSE: VIA), Google Inc (NASDAQ: GOOG) said it will remove visitor data from YouTube before it fulfills a judge's order to send data to Viacom, as a part of a larger copyright lawsuit, the Wall Street Journal reported.

OTHER PAPERS:

• As part of its effort to emerge from bankruptcy protection, the Detroit News reported that Delphi Corp (OTC: DPHIQ) announced plans to sell its brake business. Delphi has retained W.Y. Campbell and Co to help sell the unit, which has around 1,000 employees worldwide.
• The New York Post learned that Dick Fuld, the CEO of Lehman Brothers Holdings Inc (NYSE: LEH), is seriously considering ways to take the company private. The Post said that talks centering on the privatization of Lehman have "gotten very serious consideration," according to sources, although details on how a maneuver may work remain unclear.

Steve Miller's book The Turnaround Kid: What I Learned Rescuing America's Most Troubled Companies has generated considerable controversy. The Wall Street Journal (subscription required) discusses the brouhaha in some detail. I don't know enough about the situation at Delphi to have an opinion, so I'm reviewing this as a book, controversy aside.

Miller has built his reputation as a "firefighter" brought in to fix serious problems at deeply troubled companies. He got his start as the CFO at Chrysler where he signed ten thousand documents in one sitting for the loan guarantees that brought the company back from the brink. His career later took him to Olympia & York Developments Ltd., Bethlehem Steel, Morrison-Knudson, Federal-Mogul, Waste Management, and Delphi, where he currently serves as chairman.

His accounts of these struggles are interesting, but the most compelling reading comes when Miller talks about the more prominent people his career has brought him into contact with. This description of Carl Icahn alone is worth the price of admission:

Icahn was uniquely creative in his demands. He was impatient with the board's decision and would bully us to do things his way ... In face to face meetings he gave everyone whiplash. One moment he'd bellow, "That's the stupidest goddamn thing I ever heard heard," and the next he'd put his arm around you. He's effective, I think, because people become so traumatized that they wind up suffering from Stockholm syndrome and will do anything to please him.

His description of Lee Iacocca's decline caused by ego also serves as an interesting cautionary tale.

If you enjoy reading about business history, you'll like this book. And here's the best part: it's a book about management that's generally devoid of cliches and trite platitudes.

One of the nicest things about going into bankruptcy is coming back out. Unless, of course, no one will give you the money to start anew. Delphi, the large auto parts company, had $6.1 billion lined up to start business as a company out of Chapter 11, but the credit crunch is making that exit very difficult to fund.

JP Morgan (NYSE: JPM) and Citigroup (NYSE: C) were leading the group to supply Delphi with capital. But they cannot lay-off some of the loans because hedge funds and other institutions don't want the risky paper. GM (NYSE: GM), Delphi's former parent might put up some of the money, but the car company may need its cash for making up loses at its North American operations.

The banks are not required to put up the money. According to The Wall Street Journal, "J.P. Morgan and Citigroup are bound only on a 'best-efforts basis' to arrange the loan." In other words, they can dump the deal.

Raising money for a car parts company in the worst auto recession in two decade would be hard anyway. Perhaps Delphi should just stay in bankruptcy for a couple more years. The company might be better off.

Douglas A. McIntyre is an editor at 247wallst.com.

With its stock trading at around 16 cents per share in the midst of bankruptcy proceedings, the executives running Delphi Corp. (OTC: DPHIQ) decided it was time to pay themselves a bonus.

The New York Times' Gretchen Morgenson summed it up this way: "Even as it asked workers, creditors, and owners to accept big losses, Delphi requested a lush executive pay package that included $87 million in cash bonuses to be paid to top managers upon the company's exit from bankruptcy. It was a wonderful example of unshared sacrifice that has become deplorably common in corporate America."

Thankfully, those of who support cutting back on the outrageous sums paid to managers have a new hero: federal bankruptcy judge Robert D. Drain refused to OK the reorganization plan unless the pay package for the executives was cut back to $16.5 million.

It's hard to imagine that the company's top executives thought they should take home such a huge package while creditors and workers got stiffed. Somehow they'll have to survive on $16.5 million.

General Motors Corporation (NYSE: GM) agreed to a set of amendments to the reorganization plan of its former subsidiary Delphi Corp (OTC: DPHIQ) announced yesterday. Under the revised plan, the total enterprise value of DPHIQ is reduced to $13.4 billion from the $13.9 billion called for under the original plan. With the lower enterprise value, GM's recovery was reduced to $2.6 billion from $2.7 billion. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on GM.

After hitting a one-year high of $43.20 in October, the stock has slid over the past month. This morning, GM opened at $30.95. So far today the stock has hit a low of $30.25 and a high of $31.07. As of 11:35, GM is trading at $30.71, down $0.49 (-1.6%). The chart for GM looks bullish but deteriorating quickly, while S&P gives the stock a negative 2 STARS (out of 5) sell rating.

The former parts division of General Motors Corp. (NYSE: GM), Delphi Corp., signed settlement and restructuring agreements with its former parent last Friday as it rolls out is plan to emerge from Chapter 11 bankruptcy.

Delphi is trying to put behind it a slew of legal wranglings with GM so that it can begin the process of creating a profitable company without a shaky future. Its reorganization plan, which has been a long (long) time coming, outlines many areas the company has singled out as key to its return from bankruptcy. One of the biggest wins for GM is a $2.7 billion cash distribution that the automaker will receive in lieu of its multiple claims against Delphi.

But the fun does not stop there -- Delphi has reached agreements with all six U.S. labor unions. The company will continue to operate four UAW-represented sites, three IUE-CWA-represented sites and one USW-represented site. Ah, the unions get their comeuppance here (no surprise). However, a sour note is that 25 Delphi sites in North America will be sold or closed.

The relationship between GM and Delphi and the resulting bankruptcy of the latter is one of the more complex situations in the automotive business in the last decade or so. GM needs to get this behind it so that it can concentrate on the business of, you know, making cars and trucks that customers want to buy, and at competitive prices. The Delphi situation has been a drag on resources for far too long, but the clouds are starting to part.

The domestic automotive business has been beaten and torn by foreign competition for several years now, forcing many auto-parts producers, such as Tower Automotive Inc. and Delphi Corp. (OTC: DPHIQ) into bankruptcy proceedings.

A growing number of auto-part manufacturers are leaving the U.S. automobile industry altogether, divesting auto-related businesses and diversifying into other, more profitable industries. The Wall Street Journal highlighted the latest companies [subscription required] trying to make the switch to stay alive:

• SPX Corp (NYSE: SPW), a North Carolina auto manufacturer that once earned 90% of its revenue from auto-related businesses, now earns less than 3% from auto-related businesses after multiple divestitures and acquisitions. SPX Corp is now an infrastructure-related products and service manufacturer for the global power market.

• Pittsburgh-based glass and coatings manufacturer PPG Industries Inc (NYSE: PPG) has put its windshield business up for sale. The company instead will rely on its high-tech coatings business and optical & specialty material segments that offer long-term growth potential.

MOST NOTEWORTHY: Lee Enterprises (LEE), The Pep Boys (PBY), Cumulus Media (CMLS), VeraSun Energy (VSE) and Acuity Brands (AYI) were today's more noteworthy upgrades:

• Wachovia upgraded Lee Enterprises (NYSE: LEE) to Market Perform from Underperform on valuation.

• RBC Capital raised Pep Boys (NYSE: PBY) to Sector Perform from Underperform citing upside potential from its real estate monetization strategy.

• Cumulus Media (NASDAQ: CMLS) was upgraded to Hold from Sell at Citigroup based on the proposed buyout offer.

• VeraSun Energy (NYSE: VSE) was upgraded to Hold from Sell at Soleil based on the acquisition of three 110mgy ethanol projects from ASAlliance.

• Gabelli upgraded Acuity Brands (NYSE: AYI) to Hold from Sell following the company's announcement that it will pursue a tax-free spin-off of its specialty products business...

OTHER UPGRADES:

• Keefe Bruyette upgraded Delphi Financial Group (NYSE: DFG) to Outperform from Market Perform.

• RightNow Technologies (NASDAQ: RNOW) was upgraded to Outperform from Neutral at Credit Suisse.

• Pacific upgraded Secure Computing (NASDAQ: SCUR) to Outperform from Sector Perform.

• Lehman raised Xcel Energy (NYSE: XEL) to Equal Weight from Underweight.

• Stanford upgraded Amylin Pharmaceuticals (NASDAQ: AMLN) to Buy from Hold.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

Members of the United Auto Workers union are voting today on a proposed contract with Delphi Corp. (OTC:DPHIQ), the spun-off supplier to General Motors (NYSE:GM), which includes a compensation package that would drop their hourly wage for employees with seniority by $10 or more. New hires already start at a much lower pay scale, and many older workers have already taken buyout offers.

The offer, a product of long and bitter negotiations, illustrates the bind U.S. manufacturers find themselves in attempting to compete with foreign sources. According to the U.S. Bureau of Labor Statistics, the hourly production worker in the U.S. averages $23.65, while those in Brazil work for $4.09, Mexico $2.63, Taiwan $6.38, and Poland $4.54. While the Bureau did not include costs for mainland China, which certainly undercuts even these low-cost providers.

Given the staggering difference in labor costs, even these concessions might not be enough to safeguard Delphi jobs. While the Union successfully fought to keep open more plants than Delphi wished to, the company still plans to sell or shutter a number of its locations.

Although this pact only applies to 17,000 Delphi employees, it is being watched carefully as a possible template for upcoming negotiations between the big three car makers and the UAW. Included in the offer were a number of benefits such as yearly bonuses to ease the transition to a more competitive wage structure. The agreement won't effect GM's estimated $7 billion obligation to Delphi and its employees, though.

The question is, are these concessions enough to buoy Delphi? Are the guarantees they give to the workers affordable? The line of dominoes stretches all the way from the Chinese laborer working for peanuts right up to GM stockholders, and knocking this one over is bound to cause others to tremble.

Scott Black of Delphi Management mentioned in this weekend's Barron's that the spread between investment grade debt and Treasuries is just 83 basis points, the tightest in nine years.

Black went on to say that the private equity boom is not too different from the leverage buyout boom from 1980.

However, there are some differences between today and the 1980's. The debt level used in the corporate-raider-buyout boom of Perlman, Peltz, May et al was substantially higher than today. Ten percent was often the maximum equity put down. Today, equity contributions average 20% to 25% and in some cases have been in the 30% area.

The other difference is that as multiples have expanded, the equity contribution has also gone up. This is due to both more experienced PE fund managers, many of whom began their careers in the 1980s, and also operating managers of these companies are requiring a larger equity component. The guys left operating these businesses do not want to be stuck with unmanageable balance sheets.

But Black's comments are worth noting. While private-equity deal structures are more conservative, banks are opening the lending spigot. The excess in this market appears more on the lending side then the deal structure side. Both the private equity funds and operating managers have remained disciplined so far.