Delphi reached an agreement with GM on amended settlement

Posted by admin | Cadillac | Friday 12 September 2008 6:10 pm

Friday, Delphi Corp. (DPHIQ.PK:  News ) announced that it reached an agreement with GM on amended settlement and restructuring agreements. Per the agreements, Delphi will receive support from GM that Delphi estimates to be valued at approximately $10.6 billion for its transformation, increased from about $6.0 billion in the January
2008 settlement. The agreement would modify the mechanics and expand the amount of Delphi’s net hourly pension liability transfer to GM pursuant to section 414(l) of the Internal Revenue Code from $1.5 billion under the original GSA to about $3.4 billion.

General Motors Corp. announced a deal to help its former parts unit emerge from bankruptcy Friday, agreeing to assume $3.4 billion of Delphi Corp.’s pension plan.

GM said it would also make $1.2 billion in payments through the remainder of 2008 to Delphi to shore up its liquidity.

GM and Delphi announced the deal late Friday, heading off the filing of a new lien against another $900 million in Delphi’s foreign assets by the Pension Benefit Guaranty Corp.

“Despite recent challenges — including difficult credit markets, the downturn in the U.S. auto industry, and other cost pressures — our operating performance has improved significantly,” Delphi President and CEO Rodney O’Neal said. “Our team has accomplished this global transformation in the face of a complete restructuring of a significant portion of our operations.”

O’Neal said Delphi is on track to complete its transformation plan by the end of this year.

GM said it would contribute $10.6 billion in Delphi’s emergence from bankruptcy, boosting the amount it had agreed to take of Delphi’s pension liabilities from $1.5 billion to $3.4 billion, which will “preserve and fund Delphi’s hourly and salaried pension plans” Delphi said in a statement.

Delphi said it would re-enter the capital markets seeking financing of its plan of reorganization and would ask a bankruptcy judge to approve the deals on Sept. 23.

The pension transfer “will enable Delphi to take the next steps in its transformation, including the actions that should allow it to emerge from chapter 11 as soon as practicable,” Delphi said.

The company will also seek to freeze its hourly and salaried defined benefit pension

“We have remained committed to fully funding our pension plans and to being well-planned, well organized, and well-financed from the beginning of our Chapter 11 cases,” said Delphi’s Chief Restructuring Officer John Sheehan. “If approved by the Court, these actions … are significant milestones in completing the final phases of the reorganization of our U.S. operations and positioning us to complete the financing required for our emergence from chapter 11 as soon as practicable.”

General Motors will provide $10.6 billion in financial assistance to Delphi Corp. enabling the parts maker emerge from bankruptcy protection by the end of the year.

Delphi Corp. said its former parent company will take on $3.4 billion in pension obligations for hourly workers. GM originally planned to take on $1.5 pension liabilities.

The move saves Delphi from a potential lawsuit as the U.S. Pension Benefit Guarantee Corp. threatened to file a $900 million claim against the company if it did not strike a deal to transfer the hourly pensions to GM.

The company plans to freeze pension plans once it receives permission from the union to proceed.

Delphi plans to seek court approval of the new deal on Sept. 23. Delphi was originally a spin off of GM’s part manufacturing division.

Delphi has been under chapter 11 bankruptcy protection since October 2005.

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