Court OKs Delphi Retiree Benefits Cutback
February 24, 2009 (PLANSPONSOR.com) - A U.S.
Bankruptcy Court judge gave Delphi Corp. permission to cut
health care and insurance benefits for about 15,000
white-collar retirees.
According to a Reuters news report, U.S. Bankruptcy
Judge Robert Drain of the U.S. District Court for the
Southern District of New York cited Delphi's need to
conserve liquidity and said that the company had waited
for a sufficient time before seeking to suspend the
benefits.
Lawyers for the salaried retirees had argued that parts
of the U.S. Bankruptcy code limited the ability of a debtor
to modify retiree benefits, but Delphi countered that those
benefits are provided "at will." Drain ruled that the code
only applied when retirees could prove they have a
guaranteed right to those benefits, Reuters said.
The Buffalo Business Journal reported that the
retirees appearance before Drain followed their filing of
a formal objection to the benefits cutoff as of April
1.
According to the news report, the United Auto
Workers union, which represents salaried workers at two
Delphi plants, joined in the retirees' objection court
filing.
By cutting off white-collar retirees' benefits, the
Troy, Michigan-based company said it can save more than
$70 million a year and take more than $1.1 billion in
liabilities off its balance sheet, according to the news
report.
If Delphi discontinues the benefits, retirees say
they will have to buy insurance through the company at
costs that could reach up to $1,400 per month for a
couple.
Delphi Corp. filed for Chapter 11 in October
2005
(See
Delphi
Closer to Clearing Bankruptcy Emergence Hurdles
).
Fred Schneyer
editors@plansponsor.com