Judge gives conditional OK of Delphi plan

The judge wants executive cash bonuses cut from $87.9 million to $16.5 million.

NEW YORK (AP) — A judge said Tuesday he would approve the bankruptcy exit plan of auto parts supplier Delphi Corp. once it drastically reduces the total payout of cash bonuses to top executives.

The company’s plan is a reorganization blueprint that largely shifts its manufacturing to cheaper overseas plants and eliminates tens of thousands of union jobs in the U.S.

Delphi hopes to emerge from court protection before the end of March but must first secure exit financing in a tough credit market. An executive said it expected to get a commitment for $4.5 billion in financing by Wednesday but there was no indication on Tuesday that the company was close to securing the loans.

Delphi supplies some of the world’s biggest automakers, including General Motors, Ford, Volkswagen and Hyundai. Its restructuring plan was created assuming a market value for the company of $12.8 billion, or $59.61 a share.

U.S. Bankruptcy Judge Robert Drain told Delphi to slash executive cash bonuses to a total of $16.5 million from a proposed $87.9 million, which the company had intended to distribute to more than 500 managers upon emergence.

The exit plan stands on several key pillars: a commitment by equity investors to inject up to $2.55 billion, a deal with former parent General Motors Corp. over legacy labor obligations, and agreements with labor unions that led to a massive reduction in the size of the unionized work force. Still missing is $4.5 billion of a total exit financing package worth roughly $6 billion in loans that Delphi needs before it can emerge.

The reorganization plan was approved last week by 81 percent of about 4,000 eligible creditors who voted. One class of creditors rejected it.

The judge let stand the part of the company’s compensation proposal that gives more than 500 managers stock totaling 8 percent in the reorganized Delphi.

The United Auto Workers union argued the compensation plan was unfair to union workers, many of whom took early retirement or buyout offers in order to help the company get out of bankruptcy.

Attorney Peter DeChiara said UAW workers did not sacrifice all they did to give management a windfall at the end of the case. “It’s a double standard Delphi uses in approaching compensation for its executives versus its hourly employees,” DeChiara said.

The UAW and other unions saw the elimination of 27,000 of 33,000 jobs over the course of the case.

The company’s own compensation consultant, Nick Bubnovich of Watson Wyatt Worldwide, said Friday the cash bonus plan had some characteristics of a retention program, and that he knew of no other company in bankruptcy that rewarded such a large number of executives for emergence.