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Expert
Blasts Delphi Severance Payments
Oakland Press
United
States
October
12, 2005
The severance packages handed out to top executives by bankrupt Delphi Corp. have come under sharp attack from an outside consultant who described them as a form of pilfering.
In addition, the Troy-based automotive supplier was unceremoniously dropped Tuesday from the New York Stock Exchange. Also, the Pension Benefit Guarantee Corp., the federal agency that insures pension plans, estimated that Delphi's pension fund is underfunded by $10.8 billion.
The amount takes into account any assets the company already has in the plan, according to the PBGC. The agency also reported the PBGC would insure no more than $4.1 billion or less than half the total needed to meet Delphi's obligations to retirees.
General Motors Corp., which spun off Delphi in 1999, also could be liable for some of Delphi's retirement benefits. In a filing with the Securities Exchange Commission, GM revealed the documents its representatives signed back in 1999 in which it guaranteed the pension and post-retirement health-care benefits for eight years.
For GM, the worst-case scenario could require it to assume up to $11 billion in retirement benefits of those who transferred from GM to Delphi during 1999.
Delphi is the largest U.S. auto supplier. It has 50,600 U.S. employees, including 34,750 hourly workers and 15,850 salaried workers.
Meanwhile, the New York Stock Exchange suspended trading of Delphi shares Tuesday and dropped the company from its listings.
Peter Morici, professor at the Robert H. Smith School of Business at the University of Maryland, also issued a report in which he attacked the severance packages Delphi's board approved the day before it filed its bankruptcy petition in New York City.
"This is a raid on bondholders and should be disallowed by the bankruptcy court," Morici said.
"These top managers bear considerable responsibility for Delphi's sad situation. As experience in the airline industry demonstrates, extra pay for failed managers will do little to improve their performance. There is no reason to believe, as (CEO Robert S.) Miller claims, these executives are being paid less than they are worth right now. In fact, they are likely not worth what they are currently being paid," Morici added.
"If his top executives are being paid below market, as Miller claims, why have they not left Delphi already? Over the last several months, Delphi's top managers were in the best position to know the company was in deep trouble and that their future with the company was uncertain at best. Yet, they could not identify better employment alternatives?"
Morici also said benchmarking Delphi managers pay against other auto companies, suppliers and durable goods manufacturers is "silly." Executive pay in the automobile sector, like blue collar pay, is more than the automobile and parts markets will bear. That is what matters, he said.
The severance package also has been roundly criticized by political figures such as Gov. Jennifer Granholm and UAW President Ron Gettelfinger.
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