Delphi U.S. Trustee objects to key employee compensation program

By Caroline Salls

Pittsburgh, Nov. 29 - Delphi Corp.'s U.S. Trustee for its Chapter 11 case objected to the company's request to implement a key employee compensation program, according to a Monday filing with the U.S. Bankruptcy court for the Southern District of New York.

According to the objection, the company has not provided evidence that the program is based on sound business judgment, and the trustee called Delphi's justification "little more than a marketing tool."

Specifically, the trustee said the company makes a number of broad conclusions unsupported by evidence, including that the actual pay of executives for 2005 will be substantially less than market and that the executives are more likely to switch jobs because of the shortfall.

The company also maintains that executive turnover increased by 75% in the 12 months before bankruptcy, but they do not reveal which executives left and why.

In addition, the trustee said Delphi states that the proposed program compares favorably with the cost incurred in prior years by Delphi to motivate and retain its executive group, "but it fails to point out the relevance of a retention plan for executives who led a company that was unprofitable for most of the years of its independent existence."

The trustee also said the request is unreasonable and premature.

"The outcome of these cases will have a profound nationwide economic impact," the objection said.

"Because of the severe hardship that will inevitably fall on the rank and file workers in the factories and the recent change in the law, it is patently unfair and unreasonable for the [company] to seek to grant executives large bonuses and equity shares at the expense of the other employees.

"At the very least, any success in reorganizing should be shared by all employees."

A hearing on approval of the key employee program was scheduled to be held Tuesday.

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

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