The New York financiers who control a key General Motors supplier are fighting GM over price increases and a $130 million claim.
Palladium Equity Partners last week cut short discussions with GM over talks to have the automaker take back the financially troubled Guide Corp., according to a knowledgeable source. Guide supplies 75 percent of GM's exterior lighting.
Palladium wants to sell Guide back to GM for $1 - leaving GM with thousands of UAW employees and all the liabilities of the Anderson, Ind., supplier.
Palladium spokeswoman Joele Frank said Guide has been unfairly denied price increases on $85 million worth of money-losing contracts to GM. GM is obligated to pay the increase or send the work elsewhere, Guide contends. The temporary 90-day price increase GM granted earlier this month does not satisfy the contract, she said.
'GM wants to squeeze its supplier,' Frank said.
GM is prepared to take back Guide and allow Palladium to keep nearly $10 million in management fees and dividends. But the automaker wants its subsidy returned.
Palladium was provided a $212 million subsidy in the form of a five-year contract in late 1998 to help Guide's operations. Palladium sold that note to a third party for about $130 million cash. The money is now with Lightsource Parent Co., which Palladium set up to own Guide.
Palladium's Frank said it is unfair to suggest that the Lightsource funds are being denied to Guide. Palladium's investment in Guide exceeds $70 million, she said.
GM and Palladium are prepared to arbitrate, the source said, but Palladium wants the $130 million kept outside the arbitration.
Dennis Pawley, who last week resigned as Guide's chairman, said the $130 million is a sticking point.
Said Pawley: 'It's just a mess.'