Delphi, BorgWarner merger may become COVID-19 victim

Cleveland, Ohio – Cost-cutting steps taken by Delphi Technologies to shore up its finances as coronavirus plant shutdowns continue may scuttle that company’s proposed $3.3 billion merger with BorgWarner Inc.

In addition to cutting executive pay, shuttering factories, and tapping into governmental loan programs in several countries, supplier Delphi also drew down $500 million from its credit facilities, effectively taking a high-interest loan to ensure it has enough cash on hand to weather the financial crisis. General Motors made a similar financial move earlier in March.

BorgWarner officials, however, say the merger agreement between the companies requires Delphi to get written permission for such financial moves before taking them. As the purchasing company, BorgWarner would become responsible for Delphi’s debts, so drawing down its credit facilities makes the transaction more expensive.

“If such breach is not cured within 30 days, BorgWarner has the right to terminate the agreement,” BorgWarner officials said of the merger deal.

Delphi executives responded that they do not believe they are in breach of the merger agreement because they requested permission to tap credit lines, and BorgWarner “unreasonably” denied permission.

“This precaution is consistent with actions being taken by companies across all industries, regardless of whether they have immediate cash liquidity requirements,” Delphi executives said.

Both companies said they plan to spend the next 30 days resolving the dispute and that both believe a merger is still in the best interests of both companies. However, with COVID-19 auto plant closings extending later into April, the crisis may force BorgWarner’s board of directors to reconsider whether or not it has enough cash on hand to finalize the deal.

Ford extends shutdowns

In other COVID-19 news, Ford Motor Co. officials announced plans to keep factories closed beyond early- and mid-April reopening target dates. Less than a week after saying the company hoped to reopen a Mexican plant by April 7 and others by April 14, Ford officials now say plants will remain closed indefinitely.

The only Ford facility with a reopen date is its Rawsonville Components Plant in Ypsilanti, Michigan, which will open April 20, 2020, to start producing ventilators.

About the author: Robert Schoenberger is the editor of Today's Motor Vehicles and Today's eMobility and a contributor to Today's Medical Developments and Aerospace Manufacturing and Design. He has written about the automotive industry for more than 20 years at The Plain Dealer in Cleveland, Ohio; The Courier-Journal in Louisville, Kentucky; and The Clarion-Ledger in Jackson, Mississippi.

rschoenberger@gie.net