Delphi and General Motors Enter Into Modified Settlement and Restructuring Agreements; GM to Provide Additional Support for Delphi’s Emergence from CH. 11; Substantial Portion of Hourly Pension To Transfer to GM

Substantial Progress In Restructuring And Transformation;
Court Filings Summarize Reaffirmed 2008-2011 Business Plan;
Motion Filed In Support Of Plan to Preserve and Fund Hourly and Salaried Pension Programs;
September 23, 2008 Hearing Scheduled to Approve Motions on Pension Plans, GSA and MRA;
Actions to Provide Additional Liquidity; Company Stronger and Eager to Emerge

TROY, Mich. -- Delphi Corp. (PINKSHEETS: DPHIQ) today announced it 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; and
* 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 today 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.

Considerations in the Amended GSA and Amended MRA
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.

Under the Amended GSA, GM would assume responsibility for the pensions of certain of Delphi’s hourly retirement plan participants. The liabilities would be transferred in two steps, pursuant to section 414(l) of the Internal Revenue Code, and would be increased from $1.5 billion to approximately $3.4 billion. The liability transfers are subject to GM and Delphi receiving consent from a sufficient number of unions to complete the first step of the transfer. Through the implementation of the Amended GSA and Amended MRA, GM’s financial support of Delphi - which previously was to be received upon Delphi’s emergence from chapter 11 - is being pulled forward to the effectiveness of the amendments. As a result, GM will make payments to Delphi of approximately $1.2 billion in connection with the effectiveness of the Amended GSA and Amended MRA, and through the remainder of 2008. The payments by GM combined with the Company’s existing cash on hand - which totaled in excess of $1 billion at June 30, 2008, and amounts available under the Company’s DIP revolving credit facility, provide ample liquidity over the course of 2008.

By immediately implementing the Amended MRA, Delphi will be in a position to pursue exit financing in the capital markets, including through an equity-based rights offering, to support what it believes to be a viable, reaffirmed emergence business plan that incorporates current market conditions and increased GM support.

Delphi’s Chief Restructuring Officer John Sheehan said that it is in the best interests of the company to seek approval to implement the Amended GSA and Amended MRA independent of and in advance of the effectiveness of the POR. He said the company has been advised by the Creditors’ Committee that it may no longer support a settlement with GM and related transactions, if these transactions are approved in advance of the filing and approval of potential modifications to Delphi’s POR which are acceptable to the committee. Absent consensual resolution of the Creditors’ Committee concerns, the Committee may file objections to one or more of the motions and seek other relief from the Bankruptcy Court. Sheehan said Delphi will continue working toward a consensus among its principal stakeholders, including the committees, but that the likelihood of achieving consensus is speculative and not assured.

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.

“We have remained committed to fully funding our pension plans and to being well-planned, well organized, and well-financed from the beginning of our chapter 11 cases,” said Sheehan. “If approved by the Court, these actions and the additional operating support provided in the Amended GSA and Amended MRA are significant milestones in completing the final phases of the reorganization of our U.S. operations and positioning us to complete the financing required for our emergence from chapter 11 as soon as practicable.”

Transformed Delphi Poised to Complete Plans
Delphi CEO and President Rodney O’Neal said the company has achieved remarkable progress in its overall transformation, and several elements of the transformation are outlined in the motions being filed today with the Court.

“Despite recent challenges -- including difficult credit markets, the downturn in the U.S. auto industry, and other cost pressures -- our operating performance has improved significantly,” O’Neal said. “Our team has accomplished this global transformation in the face of a complete restructuring of a significant portion of our operations.”

O’Neal said Delphi is on track to complete its transformation plan by the end of this year. The key tenets of that plan were to modify U.S. labor agreements to create a competitive arena in which to conduct business; conclude Delphi’s negotiations with GM to finalize GM’s financial support for Delphi’s legacy and labor costs and confirm GM’s business commitment to the Company; streamline Delphi’s global product portfolio to capitalize on its technology and market strengths, and align its manufacturing and engineering footprint and capabilities with this new focus; transform Delphi’s salaried workforce to ensure that the company’s organizational and cost structure is competitive and aligned with its product portfolio and manufacturing footprint; and devise a workable solution to Delphi’s U.S. pension situation. In addition to working to achieve the key tenets of the transformation plan, O’Neal said that Delphi has diversified its customer base by growing its business in Europe, Asia and South America.

A summary of Delphi’s Reaffirmed 2008-2011 POR Business Plan (RPOR) is included in today’s Court filings. When the closing on Delphi’s POR was suspended on April 4, 2008 following Delphi’s plan investors refusal to close on their Investment Agreement, Delphi undertook a reaffirmation process with respect to the business plan in the POR as part of Delphi’s consideration of potential modifications to the POR in order to emerge from chapter 11 as soon as practicable. The RPOR includes revised actual and expected volumes for the North American automotive market; significant increases in certain commodity costs; changes in the under-funded status of its pension plans as a result of negative plan asset returns; and substantial incremental financial support from GM committed to as part of the modified settlement announced today.

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.

“Our progress throughout this transformation has been tremendous and could not have been achieved without the diligence and commitment of our employees, suppliers and customers,” O’Neal said. “We have maintained uninterrupted supply to our customers, and have booked record business with many of them. The approval of these amended agreements will help us continue our solid march toward becoming a completely transformed and more competitive company.”