Delphi Gets Court OK for Pension Freeze

September 24, 2008 ( - A federal bankruptcy court judge has approved a plan for Delphi Corp., a bankrupt auto parts supplier, to freeze its hourly and salaried pension plans.

A Detroit News report said U.S. Bankruptcy Judge Robert Drain ruled that Delphi could freeze its pension plans, a move Delphi has planned for nearly three years.

Delphi’s lead bankruptcy attorney Jack Butler told the newspaper that the company would freeze its salaried pension plan by September 30. Delphi is continuing to negotiate with its unions over the timing of freezing hourly pension plans and expects to complete those talks by September 30 as well.

The news report said the new deal has faced intense criticism from Delphi’s creditors, who complain Delphi has given up too much in exchange for more money from former parent GM – an additional $4.6 billion contribution to Delphi’s transformation.

GM previously agreed to assume $3.4 billion of Delphi’s underfunded hourly pension plan (See  GM Steps in on Delphi Plan ), and is using its overfunded pension plan to fund some of Delphi’s pension liabilities.

The nation’s private-sector pension insurer, Pension Benefit Guaranty Corp. (PBGC), said the deal would ensure the pensions of 64,000 Delphi hourly employees and retirees. The agency said it would drop $1.2 billion in liens it had placed against Delphi’s foreign-based assets.