Delphi Corp. is seeking permission to cancel health-care and life-insurance benefits for current and future salaried retirees, the Associated Press reports.
The bankrupt auto-parts supplier told the U.S. Bankruptcy Court in New York it wants to cut the benefits to 15,000 retirees as soon as April 1. It cited the auto industry’s sharp downturn in recent months.
The company claims it will save about $70 million per year, or $200 million through 2011, according to the AP report. Delphi also reportedly told the court that if it is permitted to cut the benefits, it will be able to reduce its balance-sheet liabilities by $1.1 billion.
The company wants the change because industrywide projections for auto sales have gone way down in the past few months. Earlier forecasts called for industrywide light vehicle production of 14.2 million units in 2009 and as many as 16.3 million units in 2011. Now, automakers say the best the industry will be able to do this year will be about 12.5 million units, Delphi said in its filing, according to the AP.
Delphi, which has been in Chapter 11 since October 2005, has been hurt by the credit crisis as it seeks financing. Last August former parent General Motors agreed to lend Delphi an additional $300 million simply to improve Delphi’s liquidity, according to The Detroit News. Altogether, GM has loaned Delphi $950 million, according to that report.
“The debtors have determined that it would be prudent to further enhance their liquidity through the balance of 2008,” Delphi’s lawyers reportedly wrote in a document at the time.