CHICAGO -- Bankrupt auto parts supplier Delphi Corp. plans to offer executives cash and up to a 10 percent stake in a reorganized Delphi as an incentive to stay, while seeking massive concessions from hourly workers.
Delphi's key employee compensation plan, which requires court approval, also provides for annual cash bonuses to encourage executives to stay through its restructuring, which it plans to complete by mid-2007, Delphi said in court papers.
"As a result of the debtor's financial performance, many of the company's incentive-based compensation programs failed to provide (its) salaried and executive work force with total compensation that is competitive with the industry norm," Delphi said.
Delphi on Saturday, Oct. 8, filed the largest bankruptcy in U.S. automotive history, promising substantial U.S. job and plant cuts after failing to obtain wage and benefit concessions from the United Auto Workers or financial aid from former parent General Motors.
The bonus proposal comes on top of Delphi's announcement Friday, Oct. 7, that it had sweetened severance packages for 21 top executives, a move the UAW said made the "bitter pill" of the company's bankruptcy filing Saturday all the more disappointing.
The Troy, Michigan-based company filed numerous motions along with the bankruptcy petitions for its U.S. units seeking approval of legal and financial advisers, the key employee compensation plan and a scheduling order for labor contracts.
Delphi said it would submit proposed contract changes to its unions on or before Oct. 21 and would begin proceedings to void agreements if it cannot negotiate cuts by mid-December.
Under its proposed key employee compensation program, 486 U.S. executives would receive cash bonuses of 30 percent to 250 percent of their salary, totaling $87.9 million, upon Delphi's exit from bankruptcy or sale of the company.
For example, President Rodney O'Neal would get a total cash bonus of $2.75 million, based on a $1.15 million average salary. Some 464 executives could earn bonuses ranging from $50,000 to $475,000, based on salaries of $120,000 to $450,000.
Delphi proposes allocating a 10 percent stake in the restructured company among Delphi's 595 domestic and foreign executives, though it would not be granted if all or most of Delphi's assets are sold in the process.
One-third of the equity stake would be issued in restricted stock and two-thirds in options, with one-quarter vested at the exit and one-quarter at each of the first three anniversaries of its exit.
CEO Steve Miller would not participate in the annual incentive or emergence plan, but would be eligible for a discretionary bonus at the end of his tenure as CEO.