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Delphi Labor Pact Gets OK

American Government Special Collections Reference Desk

Topics:  General Motors, UAW, Delphi

Delphi Labor Pact Gets OK

Anthony Fontanelle
July 24, 2007

The Delphi Corp. moved closer to emerging from bankruptcy Thursday with a court approval of its labor pact with the United Auto Workers (UAW). Meanwhile, Highland Capital Partners LP, despite rejection of $3.3B offer, will still try for a stake in the company.

Delphi said, in a regulatory filing Thursday, it had rejected a $3.3 billion plan from Highland Capital to accept Appaloosa Management LP's offer. But in its own filing, Highland said that it plans to pursue its bid for Delphi.

Jack Butler, Delphi's lead bankruptcy attorney, said that the labor pact was “carefully negotiated” adding the company was pleased a deal had been reached after long talks. “This is an appropriate settlement,” he said.

“I will approve the settlement,” said U.S. Bankruptcy Judge Robert Drain, who called the pact fair, reasonable and thoughtfully negotiated. “It's clear to me that the settlement meets all of the tests.” Drain's approval came a day after the Troy-based Delphi said that it had accepted an offer from an investment group led by Appaloosa to pump $2.55 billion into the supplier.

The Delphi pact offers veteran workers cash payments in exchange for accepting reduced wages, among other terms, Detroit News reported. The labor contract and investment plan are important steps for Delphi to emerge out of bankruptcy by the end of the year.

The Appaloosa deal replaced an agreement worth up to $3.4 billion that would have given a group spearheaded by Appaloosa and Cerberus Capital Management LP up to 70 percent of Delphi stock. That plan was turned down when private equity Cerberus, soon-to-be owner of the Chrysler Group, withdrew from the Delphi deal in April.

The Delphi bidders are among a number of buyout firms duking it out for control of automotive sector assets. Appaloosa said in a filing Thursday that it sent an angry letter to Toledo-based Dana Corp.'s board of directors after its offer was spurned in favor of a bid from Centerbridge Capital Partners, The News continued.

Appaloosa, Dana's biggest shareholder, called the Centerbridge deal “absurd and one-sided” and said that it was considering mounting a rival offer.

Delphi spokesman Lindsey Williams said the board took a number of factors into consideration before choosing Appaloosa. “Delphi engaged in significant negotiations with competing potential plan investors and chose the investor group whose proposal the company believes is in the best interest of all of its stakeholders and will allow Delphi to successfully emerge from Chapter 11 with the greatest speed and execution,” Williams said.

The Appaloosa investment plan is required to be approved first by a bankruptcy court. The equity firm can decline participation if its offer is not approved by Aug. 16. Additionally, the firm would be eligible for an $82.5 million termination payment. Delphi has requested a hearing on the financing plan as quickly as possible.

The investment plan is key to Delphi coming out of bankruptcy, as is the UAW agreement, The News said. The labor pact, which union members approved in June, covers payments for longer-term workers who will agree to take a lower hourly wage in connection with newer workers.

The union, which represents about 17,000 Delphi workers, also agreed to let the supplier close 11 of 21 UAW plants, added The News. Delphi will continue to operate four UAW plants, while seven will be sold and run by other firms. Moreover, the Troy-based supplier must still reach crucial pacts with small unions that represent about 3,000 workers and those negotiations continue. Appaloosa will have less control over the company than under the Cerberus deal.

The bidding is getting hotter than ever that it might need a Subaru air filter

Source:  Amazines.com

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