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Electronics Production | September 16, 2008

Delphi and GM enter modified settlement & restructuring agreements

Delphi is taking steps it believes are necessary to complete the successful restructuring of its U.S. operations, transformation of the company on a global basis, and emergence from chapter 11 as soon as practicable.
These steps include:
- Reaching agreement with GM on amended settlement and restructuring agreements. Per the agreements, Delphi will receive support from GM that Delphi estimates to be valued at approximately $10.6 billion for its transformation (increased from approximately $6.0 billion in the January 2008 settlement). The agreement will modify the mechanics and expand the amount of Delphi's net hourly pension liability transfer to GM pursuant to section 414(l) of the Internal Revenue Code from $1.5 billion under the original GSA to approximately $3.4 billion;
- Taking action to preserve and fund Delphi's hourly and salaried pension plans;
- Completing the reaffirmation process for the company's 2008-2011 business plan in the Revised Plan of Reorganization (RPOR), a summary of which is included in filings with the U.S. Bankruptcy Court for the Southern District of New York;
- Reporting on material additional progress with respect to Delphi's transformation plan announced in March 2006;
- Establishing its intent to enter the capital markets with its reaffirmed business plan, and to file in the Bankruptcy Court proposed modifications to its previously confirmed First Amended Joint Plan of Reorganization (POR).

The company will file several expedited motions with the Bankruptcy Court that will be considered by the Court on September 23, 2008, including:
- A motion to implement an amended and restated Global Settlement Agreement (Amended GSA) and Master Restructuring Agreement (Amended MRA) with GM. The original GSA and MRA were previously approved by the Bankruptcy Court on Jan. 25, 2008. The terms of the proposed amendments would authorize the GSA and MRA to become effective independent of and in advance of the effective date of the company's POR. The filing states that the Amended GSA and Amended MRA reflect GM's continuing and immediate support for Delphi's reorganization efforts -- including the transfer of certain hourly pension obligations - and will enable Delphi to take the next steps in its transformation, including the actions that should allow it to emerge from chapter 11 as soon as practicable.
- A motion to freeze its hourly and salaried defined benefit pension plans and provide, as applicable, replacement cash balance or defined contribution pension benefits, a salaried retirement and equalization savings program, and a supplemental executive retirement plan.

Implementation of the Amended GSA and Amended MRA at this time is necessary to preserve the substantial progress the Company has made, and to position Delphi to emerge from chapter 11 as soon as practicable. Unlike the original GSA and MRA, in which GM required that its performance under those agreements be tied to Delphi's emergence from chapter 11, the Amended GSA and Amended MRA accelerate substantially all of GM's obligations in the original agreements (estimated by Delphi to be approximately $6.0 billion in value to Delphi's transformation), which will be implemented immediately upon the effective date of the Amended GSA and Amended MRA.

In addition, a substantial portion of GM's incremental net support (estimated by Delphi to be approximately $4.6 billion in value to Delphi's transformation) also will become immediately and unconditionally effective. In exchange for GM's willingness to undertake these obligations, Delphi has agreed to treatment of GM's claims in the chapter 11 cases, and to release GM from certain claims and causes of action upon the effectiveness of the Amended GSA and the Amended MRA.

Pension Plan Modifications
The motion to modify the pension plans would authorize a freeze of the Delphi hourly pension plan following union consent and a freeze of the U.S. salaried plans. If approved by the Court, Delphi would then provide, subject to the union agreement, replacement cash balance or defined contribution pension benefits to its hourly employees; and for eligible salaried employees, Delphi would provide defined contribution pension benefits, a salaried retirement and equalization savings program, and a supplemental executive retirement plan.

Assuming that the Bankruptcy Court approves Delphi's modified settlement with GM and the pension plan modification motion at a hearing scheduled to begin on September 23, 2008, Delphi expects to enter the capital markets later this year with the RPOR and anticipates filing a motion seeking approval of modifications to the POR.

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ABOUT DELPHI'S CHAPTER 11 CASE
Delphi's chapter 11 cases were filed on Oct. 8, 2005, in the U.S. Bankruptcy Court for the Southern District of New York and were assigned to the Honorable Robert D. Drain under lead case number 05-44481 (RDD).

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