Delphi creditors committee looks to prosecute billions of dollars in spin-off claims against GM

By Caroline Salls

Pittsburgh, July 28 - Delphi Corp. requested court approval to allow the official committee of unsecured creditors to prosecute the company's claims against General Motors Corp. and some former officers in connection with the 1999 spin-off of Delphi, according to a Friday filing with the U.S. Bankruptcy Court for the Southern District of New York.

The committee said in the motion that Delphi and GM have repeatedly excluded it from discussions and negotiations regarding compensation for GM's participation in restructuring Delphi's obligations to its unions, and, as a result, the committee said the motion is not actually a request to file its complaint against GM and the officers at this time, but rather to secure a seat at the negotiation table.

Delphi has already denied the committee's request to pursue the potential billions of dollars in claims and defenses against GM, and the committee said it expects the company to oppose this motion to prosecute because it may harm Delphi's negotiations with GM.

The committee said Delphi has also already taken steps to blunt the full impact of the claims against GM.

According to the motion, following a post-bankruptcy investigation, the committee determined that GM improperly used Delphi's spin-off "to divest itself of its underperforming automotive parts division and the substantial labor, pension and benefits liabilities related to that division by causing [Delphi] to assume billions of dollars in GM obligations and to enter into transactions for the benefit of GM, at the expense of the debtors and their creditors."

The committee said after the spin-off, GM and some former officers continued to control Delphi for GM's benefit, at the expense of Delphi and its creditors.

The committee said it believes the events leading up to the spin-off leave Delphi with significant claims against GM, as well as the right to defenses and objections to any GM claims against Delphi.

According to the motion, the committee believes the claims and defenses may bring billions of dollars back to Delphi's estates, as well as avoidance of obligations Delphi was forced to undertake for GM's benefit.

The motion said the successful prosecution of these claims and defenses will "increase dramatically the payout to unsecured creditors" in Delphi's Chapter 11 case.

A hearing is scheduled for Aug. 17.

Delphi, a Troy, Mich.-based automotive electronics manufacturer, filed for bankruptcy on Oct. 8, 2005. Its Chapter 11 case number is 05-44481.

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