By Ryan Beene, Crain's Detroit Business
Detroit, Illinois -- Lear Corp.'s request to pay 29 executives and managers up to $20.6 million in bonuses for steering the auto supplier through the Chapter 11 process has drawn the resistance of the US Trustee overseeing the case.
Trustee Diana Adams filed an objection 20 July to Lear's motion, saying "considering the condition of the automotive industry and the adverse effect on auto suppliers, it is unclear why payments are even needed to retain the debtor's employees, who may have limited options to find employment elsewhere."
Under Lear's "key management incentive plan," the 29 managers, including ceo Robert Rossiter, cfo Matt Simoncini, seating systems president Lou Salvatore and others, would receive 25 percent of their bonus target if the company filed its Chapter 11 reorganisation plan by 5 Sept, 60 days after the company filed for Chapter 11 protection.
Another 50 percent of the bonus would be paid if the company emerged from Chapter 11 within 300 days of filing for bankruptcy.
The remaining 25 percent of the bonus cash would be released if the company hit certain financial targets, which Lear did not disclose.
Lear filed for Chapter 11 bankruptcy protection on 7 July, after winning support for its bankruptcy reorganisation plan from 50 percent of its bond holders and 68 percent of its secured lenders.
Adams cried foul, arguing Lear set the bar for earning the bonuses so low that the incentive plan is a retention plan in disguise.
"The major components of the (reorganisation) plan have already been agreed upon," Adams said in the objection.
The 60-day window to file a reorganisation plan with the court and the 300-day window to emerge from bankruptcy -- milestones for 75 percent of the proposed bonus payouts -- were already required in the terms agreed to by a majority of Lear's lenders prior to filing for court protection.
Thus, the bonus milestones are "merely rewarding insiders, who have fiduciary duties, for complying with their existing contractual obligations," the trustee's objection said.