Sunday, December 31, 2006

Delphi-GM talks moving forward

Saturday, December 02, 2006
Delphi-GM talks moving forward
Draft agreements between parts supplier, former parent company have lawyers optimistic.
David Shepardson / Detroit News Washington Bureau

WASHINGTON -- Delphi Corp. and former parent General Motors Corp. have exchanged "draft agreements" during intense negotiations to help the Troy-based auto parts supplier emerge from bankruptcy, court documents show.

A 110-page report filed late Thursday in U.S. Bankruptcy Court in New York sheds significant light on the mostly secret multibillion dollar negotiations between the companies and creditors that take place in a Manhattan law office.

"The parties have exchanged various draft agreements and term sheets, which taken together, have advanced negotiations considerably," Delphi lead bankruptcy lawyer Jack Butler wrote in the report. "The framework agreement remains a work in progress."

GM has been trying to reach an agreement with Delphi and the supplier's creditors over the size of the automaker's obligation to its former parts unit and its workers.

GM has said it could be between $6 billion and $7.5 billion. An agreement will likely include a guaranteed amount of GM business for Delphi for a fixed period. GM has also asserted billions in claims against Delphi.

GM, Delphi and Delphi's creditors' committee have met repeatedly at the Skadden Arps law office since Aug. 3 to try and reach a global settlement.

Skadden Arps lawyers have spent more than 3,000 hours on the negotiations and have billed Delphi about $2.5 million.

GM spokeswoman Renee Rashid-Merem said a resolution remains a top priority. "The parties are all working together" she said.

She noted as a sign of progress that U.S. Bankruptcy Judge Robert Drain has repeatedly delayed a hearing on Delphi's request to cancel its union contracts and its unprofitable contracts with GM in order to give the parties more time.

"These are very spirited and very productive negotiations and we're optimistic," she said.

GM CEO Rick Wagoner said last month that the company has already set aside $6 billion for settling its issues with Delphi, including pension obligations.

A deal with Delphi could help GM avoid getting caught in a labor strike at Delphi over the supplier's wage cut demands as it tries to reduce costs and emerge from Chapter 11 bankruptcy. A strike at Delphi could cripple GM plants.

Delphi is also at work on a 2006-2010 restructuring business plan looking at various scenarios.

Delphi wants to close 21 of its 29 U.S. plants and dramatically shrink its U.S. workforce.

It also needs "GM's financial support for Delphi's legacy and labor costs and to ascertain GM's business to commitment to (Delphi)," the filing said.

Delphi is in discussions with GM and others -- including hedge funds -- to help shore up its underfunded pension fund.

The talks include a group led by hedge fund Appaloosa Management LP and Harbinger Capital Partners along with several other hedge funds, which are private equity investment groups.

Delphi expects to freeze its pension fund for all hourly and salaried workers in the first half of 2007, the filing said

By Jan. 1, more than 20,000 hourly employees will have retired or accepted buyouts from Delphi, the company said. About 5,000 additional hourly workers were transferred back to GM. It also is eliminating 8,500 salaried jobs.

You can reach David Shepardson at (202) 662 - 8735 or

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