Delphi Gets OK To Halt Retiree Benefits

Bankruptcy judge says Delphi can stop paying for health care and insurance benefits for its retired salaried workers, effective April 1.

NEW YORK (AP) -- A bankruptcy judge on Tuesday tentatively approved Delphi Corp.'s request to stop paying for health care and life insurance benefits for its retired salaried workers, but he left the door open for some retirees 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.

"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 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.

More than 1,600 retirees sent letters to the judge in the days leading up to the hearing begging him to deny Delphi's motion.

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.