Delphi seeks to implement three-part key employee compensation program

By Caroline Salls

Pittsburgh, Oct. 14 - Delphi Corp. requested approval to implement a key employee compensation program, according to a Friday filing with the U.S. Bankruptcy Court for the Southern District of New York.

Delphi said it decided to realign its executive compensation program to properly provide incentives to personnel who are needed to implement its transformation plan and maximize value for all stakeholders.

According to the motion, more that 25 executives have already left the company since Jan. 1.

"Further exacerbating the company's risk of attrition, the commencement of a bankruptcy case heightens employee concerns regarding possible job loss, and often increases employee responsibilities, creates longer hours and imposes other burdens as a result of an employer's status as a debtor-in-possession," Delphi said in the motion.

The program does not include a retention plan but a fully developed exit plan designed to focus the company's 486 executives on achieving benchmarks and encouraging them to complete an efficient and successful reorganization.

The program includes an annual incentive plan, an emergence bonus plan and a pre-bankruptcy severance plan.

Under the annual incentive plan, employees' eligibility to receive annual bonuses is dependent on whether the company reaches its projected business plan EBITDAR levels over six-month performance periods, as well as an acceptable level of personal performance.

Each participant's bonus opportunity for a performance period will equal one-half of his or her current annual plan opportunity, except for the first performance period, when the opportunity will be 75% of the pre-bankruptcy annual plan opportunity to reflect the shortened performance periods.

The emergence program will afford eligible employees cash payments and, in some cases, available equity in the new company upon emergence from Chapter 11.

The cash component of the plan is payable to U.S. executives upon either the effective date of the confirmation of the plan of reorganization or a sale of all or substantially all of the company's assets. In addition, if the company achieves a successful reorganization, the equity component of the plan will allocate 10% of the equity in the reorganized company to Delphi's 600 domestic and foreign executives.

Cash payments will vary from 30% to 250% of a participant's salary, based on level of responsibility in the organization.

According to the filing, Delphi's chairman and chief executive officer Robert S. "Steve" Miller has opted out of the key employee compensation program and is not entitled to any compensation beyond his salary except as determined by the board of directors in connection with the completion of his service as CEO.

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

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