A US bankruptcy judge gave General Motors permission on Monday to buy several assets of bankrupt Delphi as part of a deal with a private equity firm that could take the supplier out of bankruptcy.


Judge Robert Gerber of US bankruptcy court in Manhattan gave ‘old GM’, now known as Motors Liquidation Corporation, permission to buy Delphi’s steering business and a number of its plants, deemed essential to GM’s ability to build cars, Reuters reported.


Delphi is by far GM’s largest supplier, accounting for approximately 11.3% of its purchases in 2008.


If GM’s partner in the bid for Delphi, private equity firm Platinum Equity, won the auction for Delphi that is set for later this week, ‘new GM’ or General Motors Company – which emerged from bankruptcy on Friday after the carmaker sold the bulk of its best assets to a US government-led group – would reimburse Motors Liquidation and receive the Delphi assets.


The ‘old GM’ which now consists of the remainder of the automaker’s assets, remains in bankruptcy court.


Delphi, which was spun off from General Motors in 1999 and filed for bankruptcy in 2005, said last month that it had reached a deal to sell most of its global operations to Platinum, in a plan that with the participation of GM would allow Delphi to emerge from Chapter 11 bankruptcy, the news agency noted.


In a court document, GM had said it expected the transaction to cost US$3.9bn, including a payment of $1.1bn to Delphi’s creditors and a $2bn equity stake in Parnassus, a unit of Platinum, which has submitted the only bid so far to take Delphi out of bankruptcy.


Platinum would invest $250m in Delphi under terms of the plan.


But the deal still has to get approval from the judge overseeing Delphi’s bankruptcy.


The deadline for other potential bids – ‘credit bids’ by Delphi’s lenders – is set for later this week, with the auction for Delphi scheduled for Friday. A sale hearing is scheduled for 23 July in federal bankruptcy court in Manhattan.


Under the terms of the deal, GM would buy Delphi’s steering business, as well as plants in Kokomo, Indiana; Rochester and Lockport, New York; and Grand Rapids, Michigan, Reuters said.