Judge lets Delphi halt salaried retiree benefits-WEB ONLY

A bankruptcy judge yesterday tentatively approved Delphi Corp.’s request to stop paying for its salaried retirees’ health and life insurance, but he left the door open for some former employees to be excluded from the move.

U.S. Bankruptcy Judge Robert Drain in Manhattan ruled that the auto parts supplier has a right to change the retirees’ benefits under bankruptcy law and that the cuts are justified given the company’s dire finances, its troubles finding financing and the overall state of the automotive industry.

There are as many as 5,000 retired salaried Delphi employees in central Indiana, according to the Kokomo Tribune.

“It is crystal clear to me that debtor is well within its business judgment in assuming that it will need to eliminate the projected [post-retirement benefits] liability, which is projected at $1.1 billion, in order to reorganize,” Drain said in making his ruling.

The Troy, Mich.-based company wants to cut off the benefits effective April 1. But before it does, Drain said the 15,000 affected retirees can form a committee to investigate if certain retirees, such as those who were on disability before their retirement, have the right to negotiate with the company before it can terminate their benefits.

The committee also will check if some retirees can qualify for a federal tax credit that pays 65 percent of their health care premiums if their pensions are ultimately turned over to the Pension Benefit Guarantee Corp.

The committee will present its findings to Drain at a March 11 hearing.

Delphi has been operating under Chapter 11 bankruptcy protection since 2005. The company, which had been part of General Motors Corp. until the automaker spun off its parts arm in 1999, says it needs to terminate the benefits as part of its plan to restructure and eventually emerge from bankruptcy protection.

The moves are expected to save the company more than $70 million a year.

Delphi attorney Jack Butler said the decision to cut off the benefits wasn’t one the company came to easily, but Delphi has an obligation to the lenders financing its restructuring to make the cuts.

“I don’t think any company is ever satisfied with any plan that results in changes to its health care plans for retirees.”

Delphi Executive Chairman Steve Miller testified that Delphi is still in talks with GM about the automaker taking over plants that make key parts for its vehicles. But Miller cautioned that the discussions are “far from complete” and a deal isn’t certain.

More than 1,600 retirees sent letters to the judge in recent weeks begging him to deny Delphi’s request to cut their benefits.

Jim Frost, a Delphi retiree from Buffalo, N.Y., who attended yesterday’s hearing, said he’s angry that the court sided with the company but hopes some good will come from the retiree committee.

“They basically said that all our years at GM don’t mean anything,” Frost said.

Attorneys representing the retiree groups wouldn’t immediately say whether they planned to appeal Drain’s ruling.

“I’m disappointed that the court is allowing Delphi to terminate the benefits, but we’re happy that the judge appointed a committee that may preserve the benefits of some retirees and explore the possibility of eligibility for the health care tax credit,” said Dean Gloster, a San Francisco-based attorney.

Delphi salaried retirees hired before 1993 and their survivors currently receive health insurance benefits until the age of 65 when they become eligible for Medicare. Under the changes Delphi has requested, those retirees will be responsible for paying the full cost of their health insurance, which could amount to more than $1,000 per month for a retiree and spouse.

The ruling doesn’t affect retirees who were covered by union contracts. Delphi’s unions made wage and benefit concessions in their 2007 agreements with the company.