Judge gives Delphi more time to submit plan

NEW YORK (AP) — A federal judge ruled Thursday that auto supplier Delphi Corp. can have more time to come up with a plan to exit from bankruptcy protection, but acknowledged that the auto supplier’s fate hinges on what happens to its former parent, General Motors Corp.

Judge Robert Drain gave the Troy, Mich.-based company — which has been operating under Chapter 11 bankruptcy protection for more than three years — until May 21 to submit its plan to its lenders, the same day of Delphi’s next scheduled court hearing. After that, the company’s lenders will have until June 2 to weigh in.

Meanwhile, GM faces a government-imposed restructuring deadline of June 1. If the Detroit-based automaker fails to meet the government’s requirements, it could be forced to join Delphi in Chapter 11 bankruptcy protection.

“I believe in light of all of this, the motion should be granted,” Drain said. “Obviously, there’s a tension in keeping the parties focused on a short-term basis and the cost of that in amendment fees and in the stress that puts on the company.”

GM has committed to supplying Delphi with hundreds of millions of dollars in funding since the supplier filed bankruptcy protection in 2005, in order to assure a steady supply of the parts GM needs to produce its vehicles.

But the Treasury Department’s automotive task force, which now has oversight over GM’s major financial deals, has balked at spending more without a clear-cut plan showing how the money would be used.

Industry observers have speculated the Delphi could ultimately be forced to shut down if it fails to get the financing it needs from GM.

Delphi attorney Jack Butler said progress is being made in talks between Delphi, its lenders, GM and the task force, but wouldn’t reveal details.

“There is a significant amount of activity among the stakeholders and the company is moving toward a resolution of these cases,” Butler said after Thursday’s hearing.

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

Butler said GM’s deadline was taken into account when Delphi’s new dates were negotiated. Also as part of the amended financing agreement, Delphi also agreed to include a section stating that it would continue to “explore strategic alternatives” for resolving its Chapter 11 case.

Both Delphi and GM have cut thousands of jobs and shuttered plants over the last several months in hopes of riding out one of the worst U.S. vehicle sales declines in more than 25 years.