From Detroit Free Press
TROY, MI — Delphi Corp. Chairman and CEO J.T. Battenberg III, in his first public appearance since he announced his retirement, stood by previous statements that his retirement had nothing to do with an accounting investigation that gained momentum at the world’s largest auto supplier in the days following news of his departure.
“My retirement plans had absolutely nothing to do with this investigation,” he said during a media technology briefing Monday evening at the company’s Troy headquarters. “I had planned to leave a little earlier, frankly, but I will now wait until a new CEO is named … I’ve enjoyed my 44 years in the business, but I haven’t enjoyed the last few weeks.”
Battenberg, 61, who announced his retirement Feb. 23, said the company remains committed to strong corporate governance and the U.S. Sarbanes-Oxley Act, which in 2002 put tighter restrictions on how companies must disclose and manage their financial activities.
“We have been and continue to be very strong supporters of Sarbanes-Oxley, as painful as it may be,” Battenberg said.
Delphi, which is investigating itself for improper accounting, also said it will quit buying its under-pressure stock for hourly and salaried retirement plans until it completes the probe and restates previous earnings.
Delphi notified employees of the move Friday and filed a notice with the U.S. Securities and Exchange Commission. Like many companies, Delphi purchases stock for employees as part of a 401(k) retirement plan for hourly and salaried employees.
About 13,180 salaried employees and retirees and 21,150 hourly employees and retirees participate in Delphi 401(k) retirement plans, said Delphi spokeswoman Luce Rubio. Those employees will have the ability to reallocate their savings from the Delphi stock fund into other investment options offered under Delphi’s 401(k) plan.
Delphi shares opened the year at $9.03. They closed Monday at $5.18 a share, a 42-percent drop. When Delphi went public in 1999, its shares opened at $17. In late 2000, Delphi shares topped $20.
Under Sarbanes-Oxley, directors and executive officers of Delphi are also barred from company stock purchases during this blackout period. The company hopes to file all necessary restatements by June 30.
Delphi’s decision to quit buying its own stock comes just days after Saginaw retiree Mary Brewer sued Delphi, saying the executives who knew about the unfolding accounting scandal were the same ones in charge of her U.S. salaried pension fund, and should have stopped the fund from buying up Delphi stock.
“I would have to think that they determined it was not wise to continue investing in Delphi stock,” said Brian McTigue, a lawyer in Washington, D.C., handling the case for Brewer.
There have been a number of other shareholder and employee suits filed against Delphi since the company announced March 4 that it would restate its financial statements starting in 2001 and for periods afterward, however the improper accounting involves every year since Delphi spun off from General Motors Corp. in 1999.
Rubio said Delphi’s decision to suspend stock purchases was due to SEC requirements and not in response to the lawsuits. She said employees and retirees can “exchange or transfer, withdraw or distribute, assets from the company’s common stock plan into other investment options” offered by Delphi’s 401(k) plan.
She could not say how many Delphi shares the employee retirement plans hold or how many shares they purchase in a given year. Rubio said the decision to suspend the purchase of Delphi stock only applies to Delphi’s 401(k) plan for workers, and not its pension plan, which can continue to buy Delphi stock.
Under federal law, companies are supposed to give their employees 30-day notice of a blackout plan, but Delphi said it could not because there was an unforeseeable circumstance.
As part of the accounting problems disclosed earlier this month, Delphi’s chief financial officer Alan Dawes resigned after Delphi’s board “expressed a loss of confidence in him.” Delphi’s chief accounting officer also left the company and a vice president was demoted. The SEC is also investigating Delphi.
In total, Delphi misstated profits by about $166 million and overstated cash earned by $446.5 million during a 6-year period. The company did so by claiming it sold assets that it actually was going to buy back later and by prematurely recognizing revenue from contracts and rebates.
On that news, shares of Delphi dropped from $6.37 on March 3 to $5.46 at the end of trading March 4. Delphi posts annual sales of $28.7 billion. It makes everything from steering systems to electronic parts to XM satellite radio.
Copyright 2005 Detroit Free Press. All Rights Reserved.
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