Delphi hearing on unsecured creditors' request to prosecute spin-off claims adjourned to October

By Jennifer Lanning Drey

Eugene, Ore., Aug. 17 - The hearing on Delphi Corp.'s official committee of unsecured creditors' request to prosecute the company's claims against General Motors Corp. and former officers was adjourned until Oct. 19, according to attorneys.

The hearing will be continued at the U.S. Bankruptcy Court for the Southern District of New York.

The claims are related to Delphi's 1999 spin-off from General Motors.

In its motion requesting the approval, the committee said its move was a negotiating tactic.

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

In the motion, the committee said 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.

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.

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 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.

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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