Employees and retirees sued the company, saying that executives misled investors about the company’s accounting woes in that Delphi should have known that investing retirement funds in company stock as part of Delphi Savings-Stock Purchase Program was unwise. According to the news report, the settlement covers people who traded in Delphi stock between March 7, 2000 and March 3 2005, around when the shareholder lawsuits were filed.
Delphi’s insurance company will pay $22.5 million and Delphi will pick up the remainder of the losses. Stockholders will recover as much as $295.1 million before attorney fees and expenses are paid under the proposed settlement.
Both agreements still must be approved by U.S. District Judge Gerald E. Rosen and U.S. Bankruptcy Judge Robert Drain in New York.
The Internal Revenue Service (IRS) gave its nod to a plan in May that would transfer some of Delphi’s pension liabilities to its former parent company, General Motors Corp. The plan extended the deadline Delphi had to meet minimum funding requirements for its pension plans (See Delphi Agreement Covers Pension Payment Deferrals ).
The company had to lower its pension obligations so that it could emerge from bankruptcy. The plan was part of a pension restructuring announced in March 2006 (See DB Pension Freeze Part of Delphi Restructuring).