WSJ - UAW Objects to Delphi Plan On Executive Compensation

[Klaus]

UAW Objects to Delphi Plan
On Executive Compensation

By JEFFREY MCCRACKEN
Staff Reporter of THE WALL STREET JOURNAL
November 23, 2005 1:46 p.m.

The United Auto Workers filed an objection to Delphi Corp.'s contentious plan to offer its top executives cash and bonuses potentially worth more than $500 million, arguing the proposal would impede the union in reaching an agreement with the parts supplier on wage and job cuts for hourly workers.

The UAW, which hints the executive compensation proposal could spark a strike, is getting broad outside support in the fight against Delphi's executive compensation plan, including from the federal government agency that oversees pension funds. The Pension Benefit Guaranty Corp. has also filed a motion objecting to the Delphi compensation program.

The PBGC argues the compensation plan is not "a sound business decision that will aid" in Delphi's recovery. The PBGC is concerned that hundreds of millions of dollars would go to executives at a time Delphi may not be able to pay $400 million due its pension plan in January 2006.

Also objecting to the Delphi executive compensation plan are a trustee, Wilmington Trust, that holds $2 billion of Delphi bonds, and several pension funds that had stakes in Delphi and sued the company for alleged accounting fraud before Delphi's bankruptcy filing last month. The pension funds, including ones in Mississippi and Oklahoma, an Austrian fund manager and a Dutch pension fund, allege the executive compensation plan would benefit the same senior managers these funds say fraudulently inflated the company's financial results.

Delphi, Troy, Mich., has restated earnings amid a long-running Securities and Exchange Commission investigation into its accounting.

The objections from the various parties set the stage for a showdown Jan. 5 when the employee-compensation proposal will be heard by U.S. Bankruptcy Judge Robert Drain in New York. The judge could rule from the bench or hold off on his decision. The proposal was originally to be heard next Tuesday, but it was recently rescheduled.

Delphi spokesman David Bodkin declined to comment on the objections.

The UAW, along with other Delphi unions such as the United Steel Workers, says the executive compensation plan "is decidedly the wrong message to Delphi's workers," at a time when union members are being asked to accept pay cuts from an average of $26 an hour to about $12.50 an hour.

The objection says the plan will damage the value of the Delphi estate because it would "unduly and unnecessarily complicate an already difficult'' discussion between Delphi and its unions -- a statement that taps into investor concerns that union workers could strike Delphi if the company moves to void its labor contracts and impose new labor terms through the court.

The UAW's objection, filed Tuesday afternoon, is not surprising. UAW President Ron Gettelfinger has called the proposal "obscene."

Delphi Chairman and Chief Executive Robert (Steve) Miller has said in various interviews the compensation program is necessary to keep top executives around during the bankruptcy process. He said while hourly workers are overpaid at Delphi, its top managers and executives are underpaid.

"It is imperative that the Debtor's key personnel are appropriately incentivized to maximize the financial performance of the Debtor's operations," Delphi said in its motion supporting the compensation plan. "The alignment of an incentive program that tracks the Debtors' goals is crucial to the Debtors' ability to navigate through this process and emerge successfully from Chapter 11."

Under its proposed key employee compensation plan, Delphi would allocate $21.8 million for cash bonuses to executives during the first six months of bankruptcy, and then another $87.9 million for 486 U.S. executives who would receive 30% to 250% of their salary once Delphi emerges from bankruptcy.

There is then a severance package under which Delphi's top 21 officers would collect up to 18 months salary and target bonuses, another 89 executives would get a year's salary and bonuses, and 373 officials would receive a year's pay.

The most potentially lucrative element of the compensation plan is a proposal to give Delphi's top 600 world-wide executives 10% of the equity in the reorganized company, a stake that the unions estimate could be valued at $400 million.

[Klaus]

UAW Objects to Delphi Plan
On Executive Compensation

By JEFFREY MCCRACKEN
Staff Reporter of THE WALL STREET JOURNAL
November 23, 2005 1:46 p.m.

The United Auto Workers filed an objection to Delphi Corp.'s contentious plan to offer its top executives cash and bonuses potentially worth more than $500 million, arguing the proposal would impede the union in reaching an agreement with the parts supplier on wage and job cuts for hourly workers.

The UAW, which hints the executive compensation proposal could spark a strike, is getting broad outside support in the fight against Delphi's executive compensation plan, including from the federal government agency that oversees pension funds. The Pension Benefit Guaranty Corp. has also filed a motion objecting to the Delphi compensation program.

The PBGC argues the compensation plan is not "a sound business decision that will aid" in Delphi's recovery. The PBGC is concerned that hundreds of millions of dollars would go to executives at a time Delphi may not be able to pay $400 million due its pension plan in January 2006.

Also objecting to the Delphi executive compensation plan are a trustee, Wilmington Trust, that holds $2 billion of Delphi bonds, and several pension funds that had stakes in Delphi and sued the company for alleged accounting fraud before Delphi's bankruptcy filing last month. The pension funds, including ones in Mississippi and Oklahoma, an Austrian fund manager and a Dutch pension fund, allege the executive compensation plan would benefit the same senior managers these funds say fraudulently inflated the company's financial results.

Delphi, Troy, Mich., has restated earnings amid a long-running Securities and Exchange Commission investigation into its accounting.

The objections from the various parties set the stage for a showdown Jan. 5 when the employee-compensation proposal will be heard by U.S. Bankruptcy Judge Robert Drain in New York. The judge could rule from the bench or hold off on his decision. The proposal was originally to be heard next Tuesday, but it was recently rescheduled.

Delphi spokesman David Bodkin declined to comment on the objections.

The UAW, along with other Delphi unions such as the United Steel Workers, says the executive compensation plan "is decidedly the wrong message to Delphi's workers," at a time when union members are being asked to accept pay cuts from an average of $26 an hour to about $12.50 an hour.

The objection says the plan will damage the value of the Delphi estate because it would "unduly and unnecessarily complicate an already difficult'' discussion between Delphi and its unions -- a statement that taps into investor concerns that union workers could strike Delphi if the company moves to void its labor contracts and impose new labor terms through the court.

The UAW's objection, filed Tuesday afternoon, is not surprising. UAW President Ron Gettelfinger has called the proposal "obscene."

Delphi Chairman and Chief Executive Robert (Steve) Miller has said in various interviews the compensation program is necessary to keep top executives around during the bankruptcy process. He said while hourly workers are overpaid at Delphi, its top managers and executives are underpaid.

"It is imperative that the Debtor's key personnel are appropriately incentivized to maximize the financial performance of the Debtor's operations," Delphi said in its motion supporting the compensation plan. "The alignment of an incentive program that tracks the Debtors' goals is crucial to the Debtors' ability to navigate through this process and emerge successfully from Chapter 11."

Under its proposed key employee compensation plan, Delphi would allocate $21.8 million for cash bonuses to executives during the first six months of bankruptcy, and then another $87.9 million for 486 U.S. executives who would receive 30% to 250% of their salary once Delphi emerges from bankruptcy.

There is then a severance package under which Delphi's top 21 officers would collect up to 18 months salary and target bonuses, another 89 executives would get a year's salary and bonuses, and 373 officials would receive a year's pay.

The most potentially lucrative element of the compensation plan is a proposal to give Delphi's top 600 world-wide executives 10% of the equity in the reorganized company, a stake that the unions estimate could be valued at $400 million.