Today, the Wall Street Journal catches up with a story that I first saw reported in the Financial Times on Wednesday: the UAW and a group of large shareholders, including four large U.S. and European pension funds, have filed objections in bankcruptcy court to the outrageous bonuses that Delphi executives have cleverly orchestrated for themselves once Delphi emerges from bankruptcy protection.

UAW Files Protest
To Delphi Bonuses
For Top Executives
By JEFFREY MCCRACKEN

Staff Reporter of THE WALL STREET JOURNAL

The United Auto Workers filed an objection to Delphi Corp.’s plan to offer its top executives cash and bonuses potentially valued at more than $500 million, arguing the proposal would impede the ability of the union to reach an agreement with the auto-parts supplier on wage and job cuts for hourly workers.

The UAW, which hints the proposal could spark a strike, is getting broad outside support in the fight against Delphi’s executive-compensation plan, including from the federal government agency that oversees pension funds. The Pension Benefit Guaranty Corp. has also filed a motion objecting to the Delphi program.

The PBGC argues that the plan isn’t “a sound business decision that will aid” in Delphi’s recovery. The PBGC is concerned that hundreds of millions of dollars would go to executives at a time when Delphi may not be able to pay $400 million due its pension plan in January.

Also objecting to the Delphi compensation plan are a trustee, Wilmington Trust, that holds $2 billion of Delphi bonds, and several pension funds that had stakes in Delphi and sued the company for alleged accounting fraud prior to Delphi’s bankruptcy filing last month. The pension funds, including a Mississippi and an Oklahoma fund, an Austrian fund manager and a Dutch fund, allege the compensation plan would benefit the same senior managers these funds say fraudulently inflated the company’s financial results.

Delphi has restated earnings amid a long-running investigation into its accounting by the Securities and Exchange Commission.

The objections from the various parties set the stage for a showdown Jan. 5, when the employee-compensation proposal is to be heard by U.S. Bankruptcy Judge Robert Drain in New York. The judge could rule from the bench or hold off on his decision. The hearing previously was scheduled for this Tuesday but was postponed.

Delphi spokesman David Bodkin declined to comment on the objections.

The UAW, along with other Delphi unions like the United Steel Workers, says the compensation plan “is decidedly the wrong message to Delphi’s workers,” at a time union members are being asked to accept pay cuts from an average of $26 an hour to about $12.50 an hour.

The objection says the plan would damage the value of the Delphi estate because it would “unduly and unnecessarily complicate an already difficult” discussion between Delphi and its unions — a statement that taps into investor concerns that union workers could strike if the company moves to void its labor contracts and impose new labor terms through the court.

The UAW’s objection, filed Tuesday afternoon, isn’t surprising. UAW President Ron Gettelfinger has called the proposal “obscene.”

Delphi Chairman and Chief Executive Robert S. “Steve” Miller has said in various interviews the compensation program is necessary to keep top executives around during the bankruptcy process. He said while hourly workers are overpaid at Delphi, its top managers and executives are underpaid.

“It is imperative that the debtor’s key personnel are appropriately incentivized to maximize the financial performance of the debtor’s operations,” says Delphi in its motion supporting the compensation plan. “The alignment of an incentive program that tracks the debtor’s goals is crucial to the debtor’s ability to navigate through this process and emerge successfully from Chapter 11.”

Under its proposed employee-compensation plan, Delphi would allocate $21.8 million for cash bonuses to executives during the first six months of bankruptcy, and then an additional $87.9 million for 486 U.S. executives who would receive 30% to 250% of their salaries once Delphi emerges from bankruptcy.

There is then a severance package under which Delphi’s top 21 officers would collect up to 18 months’ salary and target bonuses, 89 other executives would get a year’s salary and bonuses, and 373 officials would receive a year’s pay.

The most potentially lucrative element of the compensation plan is a proposal to give Delphi’s top 600 world-wide executives 10% of the equity in the reorganized company, a stake the unions estimate could be worth $400 million.

It’s hard to see a bankruptcy judge doing much for a union–they rarely do. But, with the pension funds wading in, it may create a new dynamic.

And how about organizing mass protests outside the bankrupcty court on the day of the hearing? Can there be a better current example of obscene corporate abuse than Delphi?