updated 6/29/2006 4:17:34 PM ET 2006-06-29T20:17:34

A bankruptcy judge on Thursday approved attrition programs that will be offered to more than 17,000 Delphi Corp. employees represented by its two largest unions, allowing the auto parts supplier to move forward on a second wave of buyout and early retirement offers.

Judge Robert Drain confirmed a motion by Delphi to offer attrition packages to about 8,500 hourly employees represented by its second-largest union, the International Union of Electronic Workers-Communications Workers of America, and 8,600 members of the United Auto Workers who were not covered in an earlier, similar program.

The company has said the “soft landing” offers, which will allow it to shrink its workforce, are a crucial part of its overall plan to emerge from bankruptcy protection. The program will cost Delphi an estimated $135 million.

In contrast to earlier court hearings, during which the unions had been at odds with Delphi, union representatives spoke in support of Delphi on Thursday. IUE-CWA attorney Tom Kennedy called the plans “incredibly important.” The union said the agreement was the result of “a consensual resolution of difficult and complex matters affecting thousands of hourly employees and their families.”

Delphi and the union reached the deal earlier this month after both sides asked the court to postpone hearings on whether Delphi could terminate its labor contracts and retirement benefits.

Delphi and its former parent company, General Motors Corp., will split the cost of the attrition packages, but GM will then receive an unsecured claim against Delphi for the full amount it contributes to the program. GM, which faces declining market share, announced Monday that 35,000 of its own employees will take buyout or early retirement offers.

Representatives of the creditors and equity committees objected to the agreement, alleging that GM would get “unjustifiable” benefits to the detriment of Delphi. They said GM would receive an unsecured claim on its contribution amount and that retiree health benefit obligations it accepts would eventually have been transferred to it with or without the plan.

GM guaranteed certain health benefits under a 1999 separation agreement when Delphi, which had been a division of GM, was spun off.

IUE-CWA hourly workers covered by the plan could opt to take $35,000 for voluntary retirement. The plan also includes buyout packages worth between $40,000 and $140,000. Employees accepting buyouts would give up all benefits except for vested, accrued pensions.

About 12,700 employees accepted packages in the first UAW plan.

Delphi is also engaged in discussions with the United Steelworkers for a similar program and could discuss the matter at a July 19 hearing.

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