Sunday, July 23, 2006

Delphi top execs get more bonuses

Thursday, July 20, 2006
Delphi top execs get more bonuses
Supplier's unions, hit with wage and benefit cuts, blast payouts that may reach $74M in '06.
Brett Clanton / The Detroit News

A U.S. bankruptcy court on Wednesday approved an extension of a multimillion dollar bonus plan for top Delphi Corp. executives over the objections of unions representing its 33,000 U.S. factory workers.

The bonuses, which the supplier argued are vital to retain key employees as it restructures, will go to 460 top officers if Delphi hits certain earnings targets between July and December. Similar bonuses, cleared by the court in February , came to $36.3 million for the first six months of the year, Delphi said. The second piece will total roughly $20 million if the company meets the performance targets and up to $37.9 million if the targets are exceeded.

But the United Auto Workers and Delphi's other five unions blasted the payouts, which come as hourly workers are being asked to accept steep wage and benefit cuts to aid the company's turnaround.

The plan "sends the message that hourly workers are the dispensable commodities of the Chapter 11 case while the executives will be insulated from the effects of a dislocating transformation," the UAW said in a court filing prior to Wednesday's hearing.

U.S. Bankruptcy Judge Robert Drain ruled that the bonus plan is a reasonable incentive to retain top corporate officers during an uncertain time.

But he denied Delphi's request to let the bonuses renew automatically at the end of each six-month period while the supplier is in bankruptcy. To extend the plan further, Delphi will need court approval .

Delphi's executive bonus plans have been a source of controversy since the company filed for bankruptcy Oct. 8 and have served as an example in the broader discussion about the fairness of executive compensation levels nationwide.

This year, total cash compensation for the highest-paid U.S. executives rose to $5.1 million, a 41.3 percent gain over 2005 levels, according to ERI Economic Research Institute and the Wall Street Journal's

Average U.S. household income, meanwhile, has risen slightly more than 10 percent since 1992.

Delphi, which is expected to lose $2 billion this year, said compensation for its top officers has been effectively gutted in bankruptcy. Executives have received only base salary and benefits, or about half of what they would make in a typical year once performance bonuses are added.

Bankrupt companies often have to seek court approval of bonuses to keep top talent from leaving, said Linda Burwell of Nemeth Burwell PC, a Detroit law firm specializing in corporate restructuring issues.

But Delphi's request comes as the company is trying to negotiate up to 60 percent pay cuts and benefit reductions from factory workers to reduce overall labor costs.

Without concessions, Delphi will return to court on Aug. 11 and ask Judge Drain to reject its labor contracts, a move that would allow the company to impose wage cuts unilaterally and could push Delphi's unions closer to a strike.

"The approval of any bonus right now is really upsetting," said Jessie Chivers, 56, an electrician at a Delphi plant in Dayton, Ohio, with 29 years on the job. "We do all the work, they reap all the benefits."

In its filing, the UAW warned the bonuses could distract from the negotiations. It also opposed Delphi's request to lower second-half earnings targets to reflect "seasonal variations" in the supplier's business.

UAW spokesman Roger Kerson declined further comment Wednesday.

Delphi spokeswoman Claudia Piccinin said the company is pleased with the court's decision.

"This brings our executive compensation opportunities to competitive levels," she said. Delphi Chairman and CEO Steve Miller will not receive a bonus under the plan approved Wednesday, she said.

In October, Delphi will return to court seeking approval of a more controversial bonus plan that could give top officers a windfall of post-bankruptcy stock options and other payouts.

"Every hard-working American worker should be outraged," Todd Jordan, a Delphi worker in Kokomo, Ind., said of the bonuses. "If they're not, then they aren't paying attention."

You can reach Brett Clanton at (313) 222-2612 or

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