Delphi Automotive was a subsidiary of General Motors. In 1999 Delphi was spun off into a separate company, which struggled and finally declared bankruptcy in 2005. Several hedge funds, Elliott Management, John Paulson & Co., Third Point, and Silver Point Capital began buying Delphi’s old debt for about 20% of face value.

In February 2009 health insurance for Delphi’s nonunion pensioners was cancelled, claiming a cash shortage. The Treasury’s Task Force discovered the debt holders had withheld millions of dollars in cash in Delphi accounts, but the debt holders still refused to release the funds.

Steve Rattner headed the task force that negotiated with the troubled companies and their creditors to avoid the collapse of the auto industry. In March 2009 Delphi threatened the Treasury Department and GM to hand over $350 million immediately or “we’ll shut you down.” GM had left its steering column and other key components in Delphi’s control. A follow through on the threat would have caused the bailout to fail and GM and Chrysler would have had to be sold off or liquidated.

In June 2009 the Treasury and GM announced a bailout deal they had agreed upon with the United Auto Workers. GM would retake control of Delphi through a joint venture with Platinum Equity. The deal would have closed 14 Delphi plants, but left the other 15 still in business, still unionized and still with jobs in the United States. It would also have returned control of key operations directly to GM.

After the Platinum plan was announced, Elliott Management quietly tripled its holdings of Delphi bonds, then, joined forces with John Paulson & Co., Third Point, and Silver Point Capital to control Delphi. The hedge funds refused to accept the Platinum plan. Their controlling interest allowed them to force the bankruptcy judge to auction all of Delphi’s stock. Under the rules of Chapter 11 bankruptcy, debtors-in-possession may bid the face value of their bonds rather than the current market value which was much lower. In this way they were able to outbid Platinum Equity and buy Delphi for an average of 67 cents per share.

They immediately said they would not pay any more U.S. worker pensions, so the government (read taxpayers), had to take over Delphi’s pension payments. To fully fund salaried workers’ pensions this year would have cost them less than $1 billion, and they had $1.4 billion in cash. Instead they used $972 million to buy auto parts plants in Asia from Bain Capital. They also got rid of every unionized worker, 25,200 of them.

In November 2011 the hedge fund syndicate took Delphi public at $22 per share, and by November 2012 Elliott Management’s Delphi profit was $1.29 billion, John Paulson & Co. $2.6 billion, Silver Point $894 million, Third Point $390 million. Almost all of Delphi’s profits have been untaxed, because the hedge funds have moved its incorporation from Michigan to Isle of Jersey, a tax haven off the coast of France.

When the hedge funds began buying control of Delphi, it had 29 plants operating in the United States. Now there are 4, with zero union production workers. Delphi now has 5000 workers in the United States and almost 100,000 overseas.