The Wall Street Journal-20080123-Delphi Is Told by Federal Judge To Reduce Executive Bonuses
Return to: The_Wall_Street_Journal-20080123
Delphi Is Told by Federal Judge To Reduce Executive Bonuses
A federal judge took aim at Delphi Corp.'s plan to pay $87 million in bonuses to executives, saying he would approve its bankruptcy- reorganization plan only after it sharply reduces the payout.
The move, which the company said it would agree to, bolsters efforts by the United Auto Workers union and other unionized workers to curtail the auto-parts maker's executive compensation in the face of their own givebacks. The unions said the cash bonuses showed that Delphi senior executives weren't making sacrifices equivalent to the sacrifices made by union members, who had to take pay, benefit and job cuts to help Delphi reorganize and become a stronger competitor in the toughening auto industry.
Delphi, of Troy, Mich., planned to pay 560 executives a total of $87 million in bonuses. The company's executive chairman, Robert "Steve" Miller, was slated to receive an $8.3 million payment and Chief Executive Rodney O'Neal $5.3 million.
But Judge Robert Drain of the U.S. Bankruptcy Court in New York said he would approve the plan as long as Delphi slashes to $16.5 million the bonuses it plans to pay top executives when it exits bankruptcy. He said Delphi didn't prove the cash bonuses were necessary to the company's larger executive-compensation plan.
Delphi spokesman Lindsey Williams said the company is "disappointed" in the decision, but said the company will reduce compensation. Delphi "will make the appropriate changes to the plan such that the confirmation order can be entered by the court," he said.
Should Judge Drain approve Delphi's reorganization plan, the company must still secure a $6.1 billion bankruptcy-exit financing package. Mr. Williams said Delphi is "very pleased" with the progress it has made. The effort is being closely watched as a sign of the health of the debt markets, which have been rocked by the U.S. housing slump.
Confirmation of the reorganization plan would keep Delphi, the former parts unit of General Motors Corp., on track to exit bankruptcy-court protection by the end of the first quarter.
