Delphi creditors committee asks court to deny company's 'wholesale surrender' to GM

By Caroline Salls

Pittsburgh, Sept. 22 - Delphi Corp.'s official committee of unsecured creditors raised objections to the company's amended global settlement and master restructuring agreements, accusing Delphi of handing over control to GM, according to Monday filings with the U.S. Bankruptcy Court for the Southern District of New York.

According to the objection, "what the debtors cast as $10.6 billion in net value being provided by GM is in fact no more than GM accepting liability it already has, which it will pay for in large part with liquidity in its pension plans it could not otherwise access, and which only partly makes up for the massive losses generated by years of GM forcing the debtors to sell parts below cost."

Specifically, the committee said of the $10.6 billion of net contributions that GM has agreed to provide, roughly $9 billion relates to GM's assumption of hourly pension and other liabilities that GM is already obligated to pay.

In addition, the committee said GM is not really paying for the assumption of any of the pension liabilities. Rather, the committee said GM is using "the multi-billion overfunding in its own pension plans to cover the pension liabilities that are being transferred by the debtors."

The committee said the company wants the court to believe that GM is entitled to "massive allowed administrative expense and unsecured claims and a release, which collectively give GM total control over the outcome of these cases," although GM has saddled Delphi with onerous labor contracts from the company's inception.

"The simple fact is that the debtors have once again knuckled under GM's demands, completely failing to avail themselves of any of the leverage at their disposal," the committee said in the objection.

The committee said the amendments will give GM extraordinary consideration in exchange for entering into transactions that are already extremely beneficial to GM.

"These agreements represent no less than the complete abdication by the debtors of all control over their destiny, without regard to the consequences to their unsecured creditors," the committee said in the objection.

"This court should not countenance such a wholesale surrender."

If the amendments are approved, the committee said Delphi's "unsecured creditors would be left holding the bag, potentially facing a paltry recovery or no recovery at all."

Also, the committee said the amendments constitute an improper "sub rosa" plan of reorganization because they set many of the key terms of a plan, including details on what GM will receive under a Delphi plan.

"The debtors are seeking to freeze critical elements of a plan into place and to give GM extraordinary control over the plan process," the committee said in the objection.

A hearing on the global settlement and master restructuring agreement amendments is scheduled for Tuesday.

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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