Judge extends deadline for Delphi

NEW YORK (AP) — A bankruptcy judge on Thursday granted Delphi Corp. more time to come up with a plan to restructure itself without its lenders taking actions that could force the struggling auto supplier into liquidation.

Judge Robert Drain extended the deadline for the Troy, Mich.-based company to submit its plan to its lenders until May 4. The lenders will then have until May 8 to approve it.

In the meantime, Delphi, its former parent General Motors Corp., members of President Barack Obama’s automotive task force and other stakeholders will be taking, with a court hearing scheduled for May 7.

“Clearly, it makes sense to continue the talks with the auto task force given their involvement with GM,” Judge Drain said in making his ruling.

In exchange for the extra time, Delphi will pay a higher interest rate on its bankruptcy financing and an undisclosed amount of other fees.

Delphi attorney Jack Butler said after Thursday’s hearing that talks continue among Delphi, GM and the task force. Progress has been made, but the sides need more time to hammer out a deal, he said.

Also at Thursday’s hearing, Judge Drain approved a Delphi motion to disband its shareholder’s committee, saying that given the current industry environment, the shareholders will not be able to recoup any of their investments.

“Unfortunately while the debtor has been able to transform itself, the transformation of the industry has gone in a different direction,” Drain said. “At this point, it appears that the debtor under any circumstance will not be able to make any distribution to its shareholders.”

Delphi has been operating under Chapter 11 bankruptcy protection for more than three years, and industry observers have speculated that Delphi could ultimately be forced to shutdown if it fails to get the financing it needs from GM.

Butler declined to comment on the possibility that Delphi could liquidate.

Meanwhile, GM’s future remains in doubt. It’s living on $13.4 billion in government loans and faces a June 1 deadline to cut its debt, reduce labor costs and take other restructuring steps. If it doesn’t meet the deadline, the company’s CEO has said it will file for bankruptcy protection.

Both Delphi and GM have cut thousands of jobs and shuttered plants over the last several months.