Lenders to Delphi didn’t spend four years in bankruptcy court just to see it all end in a government-driven deal effectively putting the parts supplier back in the hands of GM. To show their efforts have not been in vain, they are said to be readying a bid for Delphi assets that could challenge the proposed sale to deal with private equity firm Platinum Equity that was brokered by GM and Uncle Sam.

Two people familiar with the discussions say while the bid is being put together ahead of an auction today that could bring the long-defunct company back to corporate life, no terms have been reached.

A rejection of the Platinum deal would represent one of the first and only legal setbacks for the Obama administration’s autos task force in the $50-billion government-funded restructuring of GM in a fast-track bankruptcy, reports the Reuters autos team. With small business lender CIT still expected to file for bankruptcy today, the Delphi dilemma appears as yet another test of boundaries for the Treasury.

This week's Thomson Reuters Investment Banking Scorecard shows bankruptcy-related M&A at a five year high.

There were five bankruptcy-related M&A deals announced during the week, including the acquisition of venture-backed public company Nanogen by French investment holding company Financiere Elitech for $25.7 million. 

So far this year there have been 173 bankruptcy-related deals, the highest level since the same period of 2004 when there were 202.

During 2009 the most bankruptcy-related M&A deals have occurred in the industrials sector with 23 percent, followed by the media and entertainment sector with 16 percent. 

In terms of geography, U.S. targets represent 83 deals or 48 percent of the total of bankruptcy M&A.

This is hardly surprising given the speed with which some of the biggest bankruptcies have happened in the U.S. -- with a little help from section 363 easing rapid asset sales at GM and Chrysler.

The rest of the world probably has some catching up to do.

A U.S. federal judge has authrorized the sale of General Motors’ most profitable assets to a “new GM,” backed by the government, in a move seen as crucial for the automaker to exit bankruptcy protection.

The decision by Judge Robert Gerber of the U.S. bankruptcy court in Manhattan came after three days of hearings to address the 850 objections to the restructuring plan. In his 95-page opinion, Judge Gerber wrote that the sale would “prevent the death of the patient on the operating table.”

Under the terms of the revised deal, G.M. would sell its best assets, including the Chevrolet, Cadillac, Buick and GMC brands, to a new company owned largely by the American and Canadian governments and a health care trust for the United Automobile Workers union.

That still leaves the question of the “old GM,” which includes Opel, Vauxhall and Hummer. Just as people thought that GM’s plan to sell Opel and Vauxhall to Canadian auto supplier Magna International was a done deal, China’s Beijing Automotive Industry Holding made a concrete offer to buy both brands for $924 million. That leaves the future of Opel uncertain for now.

Also not a done deal: GM’s plan to sell Hummer to China’s Sichuan Tengzhong. The potential buyer is in talks with Chinese regulators to win approval for its acqusition, but there are no guarantees it will get the green light.

General Motors is back in bankruptcy court on Wednesday, seeking approval to sell its choice assets to a “New GM” in a plan to reinvigorate the automaker under U.S. government ownership.

Reuters reporters Emily Chasan and Phil Wahba will be filing updates from the hearing in the live headline box below and on the DealZone Twitter feed.

GM cleared several of the hurdles on its way out of bankruptcy Thursday at a court hearing in Manhattan. The federal bankruptcy judge gave GM the final ok to tap the rest of its $33.3 billion bankruptcy financing and a lawyer for asbestos claimants withdrew a request for official committee status. Other obstacles including the status of non-union retirees rights to healthcare benefit– are on the agenda for the afternoon. We’ll be filing updates from the hearing in the live headline box below and on our Twitter feed.

Abu Dhabi sells 3.5 billion pounds of shares in Barclays, making a handy profit, and sending the stock down well over 10 percent. In another share sale, wind turbine maker Gamesa is suspended after Iberdrola offloads 10 percent of the company in the market. Otherwise, cars still dominate: GM has filed for bankruptcy, Germany is to pay bridge financing to Opel today and a U.S. judge said overnight the sale of Chrysler will be effective on Friday. Here are today’s top deals headlines.

And in the newspapers:

British publishing group Pearson is in talks with Prisa over the possibility of buying a stake in Santillana, the Spanish media firm’s publishing house and market leader in school textbooks in Latin America, the Financial Times reported.
Prisa could be looking to sell up to 30 percent of the unit in a 315 million pound deal. Other bidders include Cengage Learning, Oxford University Press and Infinitas Learning, the paper says.

Citigroup Inc told about five former top executives they will not be paid tens of millions of dollars in promised severance payouts, the Wall Street Journal cited people familiar with the matter as saying.

France’s Carrefour is close to buying a stake in a unit of India’s Pantaloon Retail, the Business Standard reported.

French carmaker Peugeot declared itself open to any form of alliance amid turmoil in the car industry as long as the Peugeot family maintains a core presence, Peugeot Citroen PSA supervisory board chairman Thierry Peugeot, Les Echos reported.

A quarter century ago, when GM was first experimenting with Toyota-style lean manufacturing, then-GM board member Ross Perot famously complained that “Revitalizing GM is like teaching an elephant to tap dance.”

Now it’s the Obama administration’s turn to call the tune for GM as it attempts to remake the 100-year-old company in a fast-track bankruptcy process it aims to complete by August.

The goal: $50 billion in taxpayer funding to turn around GM and not a dime more.

For that bold attempt to create a “new GM” through the courts to succeed it will require a sharp break with the “old GM” that Americans have known, loved and hated for the past century.

Since it began, GM has been about deals to create and preserve scale. Its most profitable and memorable vehicles have been about size, speed and excess.

Founded by William Durant in 1908, GM was conceived as a way to consolidate brands such as Buick, Oldsmobile, Cadillac.

Under the stewardship of pioneering chief executive Alfred Sloan, who pledged the automaker would deliver “a car for every purse and purpose,” GM rose to dominate the U.S. and global industry. It added Vauxhall (1925), Germany’s Adam Opel (1929) and Australia’s Holden (1931).

It also developed a strong central bureaucracy and financial staff that have continued to define GM and the glass-towered headquarters on Detroit’s riverfront that insiders jokingly call “the mother ship.”

By the time Sloan retired as chairman in 1956, GM had some 514,000 employees, more than the population of Nevada and Wyoming combined at the time. It accounted for about half of U.S. new car production.

A large part of the reason that GM is around today is that U.S. officials accepted the argument from former chief executive Rick Wagoner and others that a company indirectly responsible for about as many American retirees as the population of Atlanta was too big to fail.

It will take more than a smaller balance sheet for GM to transform itself into the lean and green car maker that its biggest investor is describing. It will take the recognition that big is no longer beautiful.

What’s surprising: Talks for General Motors Corp’s Opel failed to yield a deal.

What’s not-so-surprising: GM needs cash. Again.

Talks that ran all through Wednesday night to sell Opel to one of four final bidders narrowed the race to two but failed in sealing a deal. German ministers, emerging in the early hours of Thursday morning after more than 12 hours of talks, blamed GM and the U.S. Treasury for the failure.

Why? Because GM, the ministers say, shocked participants by announcing it needed 300 million euros ($415 million) more in short-term cash from the German government to  keep Opel operating.

Italian automaker Fiat and Canadian auto parts supplier Magna remain in the race to buy Opel. Belgian private equity firm RHJ International is out. China’s Beijing Automotive Industry Corp was not present at the meeting but the option for it to return with a more detailed offer remained open.

Meanwhile, GM, which has lost $82 billion in the past four years and has received $19.4 billion in government funding since the beginning of this year.  It has also said it would likely need $7.6 billion from the U.S. Treasury after June 1. Buy GM cars or not, they sure are getting your money.

With highly touted plans for a new electric car in jeopardy, an overseas investor steps in to provide new capital and a much-needed endorsement.

GM? No, Tesla.

Remarkably, the terms of German automaker Daimler AG’s 10-percent stake in Tesla may have also helped the Silicon Valley electric-car start-up inch closer to GM in value.

Daimler’s vague disclosure of its purchase price as  “double digit million dollar” means Tesla is valued at a minimum of $100 million.
That would make Tesla, which was founded nearly six years ago, about one-eighth the size of 100-year-old GM.

A world away in Detroit, GM has seen its share price spiral downward to near $1.  That the price may fall to near zero if the automaker files for bankruptcy as is widely expected. It would be worth less than 2 cents if GM proceeds with plans to issue a flood of new shares to pay off creditors.

GM was worth around $768 million, making it by far the smallest component in the Dow Jones industrial average judged by market cap.

A bankruptcy judge would also cast doubts on the 2010 launch plans for GM’s Volt plug-in range-extended hybrid while Tesla’s all-electric and pricey Roadster is already on the road.

Tesla chief executive, financial backer and tech entrepreneur Elon Musk and GM executives have traded barbs in the past.

GM’s flamboyant former product chief Bob Lutz has described San Carlos, California-based Tesla as a “little West Coast outfit” that was stitching together laptop batteries together.

Musk, meanwhile, has shot back that GM’s range-extender technology in its still-in-development Volt was “neither fish nor fowl.”

Late last year, Musk, who also founded PayPal, couldn’t resist a dig when asked why GM, an early proponent of electric car technology,  had not bought his company. “I’m not sure they can afford Tesla right now,” Musk said.

In Detroit, it is a fact of life that you are what you drive.

GM and Chrysler have staked their future — and some $20 billion of taxpayer-backed loans — on the idea that they can reinvent themselves as lean, green and mean manufacturers of small and fuel-efficient cars and electric-drive vehicles.

That’s a vision that resonates with the Obama administration, which has announced an ambitious target of putting 1 million plug-in hybrid cars like the much-touted Chevy Volt on the road by 2010.

But some of Detroit’s highest-profile auto executives are still driving like its 1999. Their rides still harken back to the era when they were the kings of the road.

GM sales chief Mark LaNeve called in from the road on Friday to brief reporters on the automaker’s plans to cut dealerships.

LaNeve said he used OnStar’s hands-free dialing to join the conference call from the cockpit of a luxury Cadillac Escalade SUV.

“The Slade”, as it has become known, gets 12 miles per gallon in the city. Sales are down over 45 percent this year.

GM Chief Executive Fritz Henderson said this week that his family fleet includes a Saab 9-3 convertible for his wife, a Corvette, a Camaro and a Malibu, which his daughter drives.

Henderson’s “baby,” he said, was the Corvette, which first hit the streets more than half a century ago. The muscle car’s mileage? 16 miles per gallon city. Sales? Down 55 percent.

Across town, Chrysler Chief Executive Bob Nardelli was spotted being chauffeur-driven in a Chrysler 300 sedan to the automaker’s Auburn Hills headquarters from an upscale suburban Detroit hotel.

The car is a faded hit for Chrysler, known for it egg-crate grill, muscular styling and powerful engine. Not known so much for its green cred. City mileage? 19 miles per gallon.

Nardelli, who is expected to leave Chrysler in the next few weeks, should take note: President Obama sold his 300C with the 5.7-liter engine shortly after he began his run for the White House.