Delphi Corp. creditors are upset over General Motors' latest effort to get compensation for buying out Delphi's unionized workers.
A U.S. Bankruptcy Court judge last week expanded a GM early retirement and buyout program to all Delphi unions. The move could result in GM's making at least $400 million in additional unsecured claims in Delphi's bankruptcy case.
Under the ruling, Bankruptcy Judge Robert Drain said Delphi could offer the same GM-assisted retirement and buyout program that has yielded 12,600 UAW retirements to all 32,000 Delphi unionized employees. That includes about 8,000 workers represented by the IUE-CWA, an electrical workers union.
Other unsecured creditors oppose the new GM claims because whatever the automaker can collect when Delphi emerges from Chapter 11 bankruptcy protection potentially reduces repayment for the other creditors.
In a court filing last week in New York, the Official Committee of Unsecured Creditors challenged the claims on several grounds. The committee contends GM had no contractual obligation with Delphi to pay for the buyout and early retirements of workers represented by the IUE-CWA. GM expects to spend $5 billion to $12 billion on Delphi.
The tab is already huge. In May, Automotive News reported that GM unsecured claims for the health care portion of Delphi's retirement costs would exceed $5 billion. That's far more than the $3.5 billion in unsecured claims made by all other creditors.
If Drain allows those disputed claims to stand and the debt converts to stock equity, GM could become Delphi's largest shareholder. It is not unusual for companies reorganizing under Chapter 11 to compensate unsecured creditors with equity in the reorganized company.
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