Thursday, April 14, 2005

GM gets subpoena for Delphi records

Spokeswoman says automaker reviewed, properly accounted for transactions.

By David Shepardson / The Detroit News

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General Motors Corp. received a subpoena from the U.S. Securities and Exchange Commission on Friday seeking records from two transactions with auto parts supplier Delphi Corp., which is being investigated for accounting irregularities.

GM spokeswoman Toni Simonetti said Wednesday the SEC "has asked General Motors to produce documents related to certain transactions between GM and Delphi. We will cooperate fully with the investigation." She declined to say if any GM employees had been interviewed by the SEC.

Simonetti said the two transactions were reviewed again last month by GM's audit committee and the automaker is confident it properly accounted for them.

Last month, Troy-based Delphi disclosed that the SEC and the Justice Department were investigating accounting errors at the company. In a separate matter, Detroit U.S. Attorney Stephen J. Murphy will not take part in the criminal investigation into Delphi's accounting practices. Murphy, who worked as a lawyer on GM's legal staff until taking office last month, declined to comment. The criminal probe is being headed by the Justice Department's fraud section in Washington.

Delphi, GM's former parts unit, was spun off from the automaker in 1999.

The supplier is investigating accounting transactions dating to 1999. The company said in March that it improperly accounted for a $237 million payment to GM in 2000. The accounting error caused it to overstate pretax income by approximately $61 million in 2001.

Simonetti defended GM's accounting of the transactions under SEC scrutiny. She said that after Delphi disclosed in early March that it had made accounting errors, the automaker reviewed its accounting of the transactions and presented a report to its audit committee.

In one transaction, Delphi made the $237 million payment to GM in the third quarter of 2000 for recall-related expenses. Simonetti said GM's actual recall expenses were more than $400 million. GM didn't disclose the payment to investors, but Simonetti said that wasn't necessary.

The other transaction under scrutiny is an $85 million credit GM gave Delphi in 2001 for retiree pension and medical costs. GM properly accounted for the payment against equity, instead of treating it as a regular expense, because it was related to the spin-off, Simonetti said.

Simonetti said it took two years to issue the credit because Delphi retirees were given time to choose GM's or Delphi's retirement plan.

You can reach David Shepardson at (313) 222-2028 or dshepardson@detnews.com.