mick silver
1st March 2009, 21:56
Feb. 24 (Bloomberg) -- Delphi Corp. (http://www.bloomberg.com/apps/quote?ticker=DPHIQ%3AUS), the bankrupt auto- parts maker, won permission to cancel health-care benefits for 15,000 current and former salaried workers, saving $1.1 billion as it tries to emerge from court protection amid falling vehicle sales.
U.S. Bankruptcy Judge Robert Drain (http://search.bloomberg.com/search?q=Robert+Drain&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1) in New York issued the ruling today after witnesses for Troy, Michigan-based Delphi testified the cuts were vital to its survival because its lenders demanded them. About 1,600 objections were filed by workers.
Ending the benefits will save $70 million a year and eliminate $1.1 billion of debt, Delphi said. The company has said its value has fallen so much that it may be unable to cover debt accrued while in bankruptcy. Robert Vican, a Delphi employee who retired in 2001 after almost 37 years at the company, said the ruling would be especially painful for elderly former workers.
“It’s a real shame,” said Vican, of Hemlock, Michigan. “It’s an easy way out, to take something away from people who can’t do anything about it. The majority of these people bent over backward to satisfy that company.”
The parts-maker won approval in January 2007 of a Chapter 11 turnaround plan that valued the company at about $12.8 billion. That value was later reduced to $7.2 billion. Delphi wasn’t able to implement the plan in April because investors led by Appaloosa Management LP backed out of an agreement to provide as much as $2.55 billion, saying the company failed to meet conditions.
‘Terminate the Benefits’
Delphi’s bankruptcy lenders “have made it very clear that the company has a fiduciary duty to terminate the benefits,” Delphi’s lawyer, John Butler Jr. (http://search.bloomberg.com/search?q=John+Butler+Jr.&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), told the judge. “They simply will not support having discretionary liabilities of this magnitude on the reorganized balance sheet.”
Butler said in an e-mail that Delphi isn’t considering converting the case to a Chapter 7 liquidation. Delphi will make changes to its reorganization plan, which it will file on April 2, Butler said.
“The company is working towards completing those modifications and emerging from Chapter 11 reorganization as soon as practicable,” he said.
The termination of benefits takes effect April 1. Drain allowed the affected retirees to form a committee to work with Delphi and determine if any in the group belong to a “subset” of vested workers who can negotiate over their benefits. Drain set a March 11 hearing to discuss the committee’s findings.
‘At-Will Programs’
“These are at-will programs,” Butler said after the hearing. “If it turns out that a subset of employees that have programs that are not at-will, then we would address them differently,” he said, without specifying what kinds of employee situations might be part of the subset.
It’s “crystal clear” that Delphi, which filed bankruptcy in 2005, “is well within its business judgment in assuming it will need to eliminate the accumulated” projected liability, Drain said at the hearing.
http://www.bloomberg.com/apps/news?p...Jr8&refer=news (http://www.bloomberg.com/apps/news?pid=20601103&sid=a2y1fCLmKJr8&refer=news)#
U.S. Bankruptcy Judge Robert Drain (http://search.bloomberg.com/search?q=Robert+Drain&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1) in New York issued the ruling today after witnesses for Troy, Michigan-based Delphi testified the cuts were vital to its survival because its lenders demanded them. About 1,600 objections were filed by workers.
Ending the benefits will save $70 million a year and eliminate $1.1 billion of debt, Delphi said. The company has said its value has fallen so much that it may be unable to cover debt accrued while in bankruptcy. Robert Vican, a Delphi employee who retired in 2001 after almost 37 years at the company, said the ruling would be especially painful for elderly former workers.
“It’s a real shame,” said Vican, of Hemlock, Michigan. “It’s an easy way out, to take something away from people who can’t do anything about it. The majority of these people bent over backward to satisfy that company.”
The parts-maker won approval in January 2007 of a Chapter 11 turnaround plan that valued the company at about $12.8 billion. That value was later reduced to $7.2 billion. Delphi wasn’t able to implement the plan in April because investors led by Appaloosa Management LP backed out of an agreement to provide as much as $2.55 billion, saying the company failed to meet conditions.
‘Terminate the Benefits’
Delphi’s bankruptcy lenders “have made it very clear that the company has a fiduciary duty to terminate the benefits,” Delphi’s lawyer, John Butler Jr. (http://search.bloomberg.com/search?q=John+Butler+Jr.&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), told the judge. “They simply will not support having discretionary liabilities of this magnitude on the reorganized balance sheet.”
Butler said in an e-mail that Delphi isn’t considering converting the case to a Chapter 7 liquidation. Delphi will make changes to its reorganization plan, which it will file on April 2, Butler said.
“The company is working towards completing those modifications and emerging from Chapter 11 reorganization as soon as practicable,” he said.
The termination of benefits takes effect April 1. Drain allowed the affected retirees to form a committee to work with Delphi and determine if any in the group belong to a “subset” of vested workers who can negotiate over their benefits. Drain set a March 11 hearing to discuss the committee’s findings.
‘At-Will Programs’
“These are at-will programs,” Butler said after the hearing. “If it turns out that a subset of employees that have programs that are not at-will, then we would address them differently,” he said, without specifying what kinds of employee situations might be part of the subset.
It’s “crystal clear” that Delphi, which filed bankruptcy in 2005, “is well within its business judgment in assuming it will need to eliminate the accumulated” projected liability, Drain said at the hearing.
http://www.bloomberg.com/apps/news?p...Jr8&refer=news (http://www.bloomberg.com/apps/news?pid=20601103&sid=a2y1fCLmKJr8&refer=news)#