GM raises support in Delphi bankruptcy plan

NEW YORK - Delphi Corp. and General Motors Corp. said Friday they have reached a new deal on the automaker’s role in Delphi’s bankruptcy that puts the supplier on track to exit Chapter 11 by the end of the year.

Under the new deal, GM’s financial support of Delphi’s emergence from court protection has grown to $10.6 billion, up from $6 billion in an earlier plan. The automaker will now take on $3.4 billion in pension obligations for hourly workers, instead of the $1.5 billion that was predicted earlier.

Delphi said it planned to freeze its pension plans for salaried and hourly workers once it has union permission to do so.

Delphi will seek court approval for the proposal Sept. 23. The new agreements with GM could allow Delphi to exit bankruptcy by the end of the year, Chief Executive Rodney O’Neal said in a statement.

The deal announced Friday fends off the government’s pension insurer, which threatened to file a $900 million claim against Delphi. The Pension Benefit Guaranty Corp. had said it would file a lien as early as Friday if the companies didn’t move forward with a plan to transfer hourly pension obligations to GM. Delphi was GM’s parts-making unit until a 1999 spin-off.

Delphi and its former parent had been negotiating the level of GM’s financial support as the supplier worked to reformulate its reorganization plan.

An earlier plan included the participation of a group of equity investors who said they would inject up to $2.55 billion into the company.

That deal fell through in April when the investors backed out. If Delphi’s new deal with GM is approved, the automaker could immediately inject $1.2 billion to give Delphi “ample liquidity” for the rest of the year. Delphi said it had about $1 billion in cash on hand as of the end of June.

Having more cash puts Delphi in better position to pursue loans in the restricted credit markets. The company’s ability to get loans has been a key obstacle that has delayed its exit from bankruptcy.

Its former lead equity investor, Appaloosa Management LP, protested vigorously when Delphi struggled to get the loans it needed to exit court protection and GM offered to increase the amount it would lend.

Appaloosa said such a deal would diminish its power over the reorganized company.

The two sides are now locked in a separate fraud lawsuit over the group’s withdrawal from the deal.

Troy, Mich.-based Delphi has been operating under bankruptcy protection since October 2005.

David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich., said any money GM invests in Delphi isn’t a giveaway.