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Delphi Creditors Object to Job-Buyout Provision

April 06, 2006|From Bloomberg News

Delphi Corp. creditors objected in court to a company job-cutting plan that might require the ailing auto-parts maker to repay billions of dollars in labor costs to General Motors Corp.

GM, Delphi and the United Auto Workers union agreed March 22 on a plan to offer 13,000 Delphi employees incentives to retire and to give jobs at GM to 5,000 more. GM, Delphi's former parent, agreed to assume the cost of the incentives.

Unsecured creditors said Wednesday that the U.S. Bankruptcy Court in Manhattan should reject the current plan because it allowed GM to file a claim against Delphi to cover the cost of benefits to the 5,000 employees it hires.

"The program would create an outsized, unnecessary and unjustifiable claim for GM," Robert Rosenberg, a lawyer for unsecured creditors. "The debtor's payment obligation to GM would be in the billions of dollars."

GM is listed as Delphi's largest creditor in court papers, with claims exceeding $1.3 billion. The case is the largest auto-related bankruptcy filing in history.

Under a 1998 agreement, GM can demand payment from Delphi equal to the projected cost of benefits for any employee who moves to GM from Delphi.

The creditors want the provision removed and said Delphi should scrap the 1998 agreement. Under bankruptcy law, a debtor can reject contracts signed before a bankruptcy filing without penalty.

"It's a legitimate claim on the part of General Motors," GM spokesman Jerry Dubrowski said. "We are willing to participate in Delphi's reorganization but on terms that make sense for GM and its stockholders."

U.S. Bankruptcy Judge Robert Drain will consider the plan at a hearing Friday in New York.

Shares of GM rose 37 cents to $19.91.

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