Delphi Absolved Of Retiree Obligations

Automotive News [sub] reports that GM spin-off supplier Delphi has received approval from bankruptcy court to cut benefits to 15k non-union retirees. The ruling will save Delphi an estimated $70M per year, improving the chances Delphi will end its nearly 3.5-year sojourn in Chapter 11 restructuring. GM has been helping generously towards that end, having offered to buy Delphi’s steering component business for an undisclosed sum and funneled hundreds of millions to its crucial supplier. Or quasi-independent division. Or whatever Delphi really is to GM. The full text of the order in question is here (pdf). It’s long, so check out a few highlights after the jump.

“The Debtors are hereby authorized, but not directed, to freeze the Delphi Hourly-Rate Employees Pension Plan (the “Hourly Plan”), in whole or in part, effective as soon as practicable following receipt of consent from the applicable Unions,” it begins. Interestingly, one of Delphi’s first-day filings (pdf) asked their judge “to consider rejection of the collective bargaining agreements with those Unions with which the Debtors do not have ratified, signed cost-reduction agreements, and to consider elimination of their retiree medical and life insurance benefits.” Oh, yeah, “on an expedited basis,” too. Consent, as they say, is sexy. And the unions weren’t giving it up cheap.

The salaried chumps, on the other hand, didn’t have Ron Gettlfinger and company manning the ramparts for them. “The Debtors are hereby authorized, but not directed,” wrote the Judge Drain way back in September, “to freeze the Delphi Retirement Program for Salaried Employees, the Delphi Mechatronic Systems 3 Retirement Program, the ASEC Manufacturing Retirement Program, and the Packard-Hughes Interconnect Non-Bargaining Retirement Plan.” These were replaced with what amounts to a 401k, except for executives who get the appropriately acronymed SERPS program.

The Retiree Committee brief sought to “explore the efficacy of preserving applicable federal tax credits available for retirees in connection with the debtors’ implementation of the Court’s authorization to modify retiree benefits, and to consider appropriate modifications to the Court’s order in return for waiving, as the representatives of all retirees, appellate rights with respect to the Benefits Order.” Whether these benefits were “vested” seems to have been an issue.