NEW YORK (AP) – A federal bankruptcy judge approved Delphi's extension of a plan to pay as much as $37 million in bonuses to top executives.
Delphi Corp. lawyer John W. Butler said that pay for managers of the auto parts maker is uncompetitively low and that the plan provides an integral part of total pay packages.
Judge Robert Drain ruled that paying the bonuses was an exercise of sound business judgment, and that he saw them as necessary to the company's competitiveness.
Delphi, one of the world's biggest auto parts suppliers, is going through the largest manufacturing bankruptcy in history, according to Butler.
Four unions representing Delphi employees – the United Auto Workers, International Union of Electronic Workers-Communications Workers of America, United Steelworkers and International Brotherhood of Electrical Workers – objected to the performance-based bonus program.
UAW lawyer Babette Ceccotti said the plan posed a distraction to ongoing negotiations between the company and union. The company's execution of its restructuring plan has eliminated tens of thousands of union jobs at Delphi.
As of Feb. 15, 440 Delphi employees were eligible for the bonus plan, under which total payouts could range from $20.1 million, if targets are met, to a maximum of $37.4 million.
The size of the bonuses were tied to a companywide earnings target and profit goals for Delphi's various divisions for the first six months of this year.
Executive compensation was a key focus of a bankruptcy reform act that was put into effect just days after Delphi entered bankruptcy in October 2005. A change in the law, which does not apply to Troy, Michigan-based Delphi Corp., prohibits employees from getting retention bonuses unless they have secured a competing offer for equal or higher pay.