The United Steelworkers and United Auto Workers are appealing a judge's decision allowing six top Dana Corp. executives to get up to $12.5 million in annual bonuses during the Toledo firm's bankruptcy protection.
The unions, which are facing substantial changes in workers' labor contracts and the elimination of retiree health-care benefits, contend Judge Burton Lifland of U.S. Bankruptcy Court in Manhattan did not adhere to recent bankruptcy law changes.
Those changes include provisions preventing executives from taking sizable bonuses while workers suffer cuts in pay or benefits.
"There is a legal aspect to this," David Jury, a lawyer for the steelworkers union, said yesterday. "There is also another aspect to this, and that is context."
After weeks of debate and revisions, Judge Lifland in September rejected a plan to give retention bonuses to Chairman and Chief Executive Mike Burns and five other executives.
Then, in November, Dana proposed an incentive-based bonus plan days before announcing it wants to cut $540 million a year, in part by eliminating health benefits for all retirees and reducing labor costs.
Last month, Judge Lifland capped Mr. Burns' annual bonus potential at $5.5 million; the other executives collectively could get up to $7 million a year.
Meanwhile, a hearing is scheduled for March 12 to consider Dana's plans to end retiree health benefits and reject labor contracts.
"The differences are quite stark," Mr. Jury said.
Dana spokesman Chuck Hartlage noted yesterday that the executive compensation plan approved by the court was supported by creditors and equity committees. Bonuses are dependent on Dana achieving specified performance targets, he added.
"If Dana is to emerge from Chapter 11 as a strong competitor with sustainable profitability over the long term - an end result that will benefit all of the company's stakeholders - it needs strong leadership," he said. "This plan helps ensure that."
Roger Kerson, a spokesman for the UAW, said that not only are employees and retirees affected by the bankruptcy, longtime shareholders have suffered financial losses from the drop in Dana's stock price.
"We don't think it's appropriate for a few individuals to be excessively rewarded," Mr. Kerson said.
Dana filed for bankruptcy protection in March, 2006, because of cash-flow problems.
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