Troy-based Delphi Corp. sought permission Wednesday from a federal bankruptcy court in New York to cancel retiree health benefits for current and future salaried retirees, a move that it says would save the company $200 million from 2009 through 2011.
The auto parts supplier also sought to end post-retirement basic life insurance benefits for current and future retirees.
The moves would allow Delphi to reduce its balance sheet liabilities by $1.1 billion. About 15,000 salaried retirees with medical and insurance benefits would lose coverage. The company wants to end coverage "as soon as (it is able) after March 31."
The company also moved to cancel all retiree health reimbursement accounts for Medicare-eligible salaried retirees and terminate the Medicare Part B special benefit for current and future salaried retirees and their surviving spouses.
"This is a decision that was as tough for us to make as it was for employees to receive. It's a tough, hard decision," said Delphi spokesman Lindsey Williams, noting the declining auto market and worsening economy prompted the move. "It wasn't one we wanted to do."
Delphi has about 10,000 salaried employees.
For workers hired after 1999, Delphi doesn't pay retiree health benefits, but puts 1 percent of an employee's base pay into a retirement savings plan. That contribution would be canceled if the court granted permission.
Retirees would be allowed to keep coverage if they paid for it, Delphi said.
Delphi, which has been under bankruptcy protection since 2005, has been struggling to emerge in recent months in the face of tight credit. Delphi had planned to continue the programs until it ran into difficulty raising enough funds to emerge from bankruptcy. The company noted that auto sales have declined dramatically.
Delphi's "reasonable business judgment no longer permits them to maintain discretionary benefit programs ... that would cost hundreds of millions of dollars," the company said in a court filing. "Delphi has been working and continues to work closely with its advisors and stakeholders to re-evaluate its business plan and implement cash-conservation measures wherever it can."
Delphi said in its filing that it plans to revise its bankruptcy plan and file it by the end of the month as it struggles to shore up its cash. It asked the court to approve a deal to accelerate a $100 million payment from GM into the first quarter from the second quarter. It also disclosed that the value of the company may now be less than what it owes banks and investors funding its bankruptcy case.
This is the latest benefit cut sought by Delphi. In September, Delphi won permission to freeze its pension plans.
Delphi offered cash payments, early retirements and buyouts to win approval to reduce hourly pay for most union workers from $27 an hour to as little as $14 an hour. It also won the right to hire workers at $14 an hour.
Delphi's hourly manufacturing cost has been cut to about $27 an hour this year from $73 an hour in 2005. Delphi rocked the auto industry when it filed for Chapter 11 bankruptcy protection on Oct. 8, 2005. Since then, it has lost more than $12 billion, closed 21 of its 29 U.S. factories, and cut its hourly work force nearly 50 percent and its salaried work force almost 40 percent.
A Feb. 24 hearing on the retiree health benefits and insurance request has been set.
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