GM May Spin Off Rest Of Delphi

General Motors is reportedly set to approve the spinoff next month of its remaining 82.3 percent interest in Delphi Automotive Systems, as the world's largest carmaker seeks to reduce the profit drag from its parts subsidiary.

GM's board was meeting Monday. The company does not disclose the topics of its board gatherings.

If all goes according to plan, GM will distribute the rest of its stake in Delphi to shareholders in May, several months before big contract renegotiations with its workers union open, The Wall Street Journal reported. The company does not want the spinoff, which the union leadership opposes, to interfere with those negotiations.

GM sold 17.7 percent of the shares in Delphi in an initial public offering Feb. 5 at $17 each. Shares now trade at 17 5/16, down 1/8 Monday. The spinoff, however, could depress Delphi stock if GM shareholders decide to sell their holdings immediately.

The auto manufacturer is focusing on designing and assembling cars and trucks and spinning off less-profitable businesses. The Dephi unit, once considered a jewel, is now seen as a drag on earnings. The unit has a reputation for being less efficient and more expensive than other parts makers, particularly nonunion ones. GM wants to buy more parts from other suppliers.

Delphi's leadership, however, believes it can make the parts maker more productive and competitive. By going it alone, moreover, the company will be able to seek deals with rivals of GM such as Ford Motor Co., which were precluded before.

Last year, Delphi earned $889 million, down 36 percent from $1.38 billion in 1997, including special items. Profits were undercut by a nationwide strike last summer and recessions in key overseas markets.

The company, with 200,000 employees in 37 countries, makes air bags, air conditioners, brakes, and fuel and emissions controls, among other vehicle parts.

Written By Jeffry Bartash, CBS MarketWatch