Delphi gets court OK for $200 million agreement with GM over warranty disputes

By Reshmi Basu

New York, Sept. 27 - Delphi Corp. obtained court approval Thursday for a $200 million settlement agreement with General Motors Corp. that resolves damage claims against Delphi over warrantees over defective parts manufactured by the company.

In 2006, Delphi's largest customer, GM, filed a $530 million proof of claim, which potentially could have cost the estate hundreds of millions of dollars in liabilities, said Delphi counsel Jack Butler of Skadden, Arps, Slate, Meagher & Flom LLP in court Thursday.

However the new settlement would reduce that amount by $330 million and "resolve all known claims," he added.

Delphi would pay GM $130 million in cash as well as replace an estimated $70 million in faulty parts.

The accord also prohibits the parties from initiating actions against each other over the claims.

Meanwhile Delphi keeps the right to pursue certain actions against relevant manufacturers and will share half of the recoveries with GM.

In approving the deal, judge Robert D. Drain of the U.S. Bankruptcy Court for the Southern District of New York called the settlement "fair and reasonable."

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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