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Delphi to end salaried retiree health benefits

Automotive News | February 6, 2009 – 12:01 am EST

 

Delphi to end salaried retiree health benefits
 

DETROIT (Reuters) — Troubled auto parts maker Delphi Corp said its value had deteriorated more than expected in recent months amid a steep slump in the auto sector and it has sought U.S. Bankruptcy Court permission to eliminate health care benefits for 15,000 salaried retirees.

In a stark example of the rapid deterioration in the auto industry, Delphi warned in court filings that the value of its business "will be substantially below" the $6.3 billion it had estimated as a worst case scenario in October.

Delphi, which filed for bankruptcy protection in New York in 2005, said in papers filed on Wednesday it could save more than $70 million per year by cutting the salaried retiree health care programs.

The auto parts maker said it had intended to maintain health care benefits for white collar retirees, but could no longer maintain such discretionary programs. It wants to eliminate the coverage at the end of March.

Delphi had been set to exit Chapter 11 in April, but was held up when an equity plan to support the move fell through.

A freeze up in credit markets later ensnared Delphi’s reorganization efforts and led to a rapid deterioration in U.S. auto sales including former parent General Motors Corp.

GM itself is restructuring under a $13.4 billion government bailout. Delphi remains GM’s biggest parts supplier and GM is also its biggest customer.

U.S. auto sales plunged 18 percent to 13.2 million vehicles in 2008, with the brunt of the declines felt in the last few months of the year with the nation mired in a recession. Most auto experts expect sales to plunge again in 2009.

Delphi has asked the U.S. Bankruptcy Court for the Southern District of New York to hear the termination request Feb. 24. The case is In re Delphi Corp, et al, U.S. Bankruptcy Court, Southern District of New York, No. 05-44481.


 

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