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Judge orders Delphi, GM, auto task force into mediation

Wednesday, May 20, 2009

Judge orders Delphi, GM, auto task force into mediation

David Shepardson / Detroit News Washington Bureau

Washington — A federal bankruptcy judge ordered Delphi Corp., General Motors Corp. and the Obama auto task force into mediation in an effort to reach a deal to allow the Troy-based auto supplier to emerge from bankruptcy after more than three years under court protection.

U.S. Bankruptcy Judge Robert Drain ordered Delphi, GM, its lenders and the auto task force into mediation in front of U.S. Bankruptcy Judge Cecila G. Morris.

Delphi had faced a Thursday deadline to reach a deal acceptable to the Treasury Department, GM and its creditors, but it was recently extended until May 29.

"While the court is satisfied that the referred parties are conducting themselves in good faith regarding the subject matters referred to the mediator, and understand that they will proceed with their analyses and negotiations the court concludes that mediation may contribute to a consensual resolution of these chapter 11 cases," Drain wrote in an order late Wednesday.

The results of talks "are nonbinding unless the parties agree otherwise." Morris will issue a report at the end of the talks.

Delphi is working with its lenders, GM and the Treasury Department, "to agree on a sensible and practical reconfiguration of the milestones relating to modifications" of its plan to emerge from bankruptcy, said Delphi lawyer Jack Butler earlier this month.

GM and the Obama administration have blamed Delphi’s creditors for stalling a deal that would let Delphi emerge from bankruptcy.

The Treasury has blocked a deal to allow GM to buy Delphi’s steering business for $150 million, under its broad authority to approve or reject major GM transactions, including all deals of $100 million or more.

Delphi now has until May 29 to complete a term sheet, and its loans would terminate in early June, effectively forcing the Troy-based auto supplier into liquidation without another extension.

GM said earlier this month it has set aside $12.5 billion to pay for Delphi-related expenses, including assuming some of its pension obligations.

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