sc13dza

0000950134-07-000570.txt : 20070112 0000950134-07-000570.hdr.sgml : 20070112 20070112171600 ACCESSION NUMBER: 0000950134-07-000570 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20070112 DATE AS OF CHANGE: 20070112 GROUP MEMBERS: HIGHLAND CREDIT STRATEGIES FUND GROUP MEMBERS: HIGHLAND MULTI-STRATEGY MASTER FUND LP GROUP MEMBERS: HIGHLAND MULTI-STRATEGY ONSHORE MASTER SUBFUND LLC GROUP MEMBERS: JAMES DONDERO GROUP MEMBERS: STRAND ADVISORS INC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: DELPHI CORP CENTRAL INDEX KEY: 0001072342 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 383430473 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-56957 FILM NUMBER: 07529452 BUSINESS ADDRESS: STREET 1: 5725 DELPHI DRIVE CITY: TROY STATE: MI ZIP: 48098 BUSINESS PHONE: 248-813-2000 MAIL ADDRESS: STREET 1: 5725 DELPHI DRIVE CITY: TROY STATE: MI ZIP: 48098 FORMER COMPANY: FORMER CONFORMED NAME: DELPHI AUTOMOTIVE SYSTEMS CORP DATE OF NAME CHANGE: 19981020 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: HIGHLAND CAPITAL MANAGEMENT LP CENTRAL INDEX KEY: 0001167365 IRS NUMBER: 752716725 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 13455 NOEL ROAD STE 1300 CITY: DALLAS STATE: TX ZIP: 75240 BUSINESS PHONE: 9726284100 MAIL ADDRESS: STREET 1: 13455 NOEL ROAD STE 1300 CITY: DALLAS STATE: TX ZIP: 75240 SC 13D/A 1 d42722sc13dza.htm AMENDMENT TO SCHEDULE 13D sc13dza


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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

Under the Securities Exchange Act of 1934
(Amendment No. 2 )*

Delphi Corporation

(Name of Issuer)

Common Stock, $0.01 par value per share

(Title of Class of Securities)

247126105

(CUSIP Number)

J. Kevin Ciavarra, Esq.
Highland Capital Management, L.P.
Two Galleria Tower
13455 Noel Road, Suite 800
Dallas, Texas 75240
(972) 628-4100

(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)

January 9, 2007

(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. o

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.

* The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

Persons who respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.

TABLE OF CONTENTS


	Item 4. Purpose of Transaction
	Item 7. Material to be Filed as Exhibits
SIGNATURES
EXHIBITS
Letter


CUSIP No.		247126105		Page		2		of		11


1	NAMES OF REPORTING PERSONS: Highland Capital Management, L.P., a Delaware limited partnership

	I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY):
	75-2716725

2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS):
	(a) o
	(b) o

3	SEC USE ONLY:



4	SOURCE OF FUNDS (SEE INSTRUCTIONS):

	AF

5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e):

	o

6	CITIZENSHIP OR PLACE OF ORGANIZATION:

	Delaware

		7	SOLE VOTING POWER:

NUMBER OF			38,984,132

SHARES		8	SHARED VOTING POWER:
BENEFICIALLY
OWNED BY			5,272,783

EACH		9	SOLE DISPOSITIVE POWER:
REPORTING
PERSON			38,984,132

WITH		10	SHARED DISPOSITIVE POWER:

			5,272,783

11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:

	44,256,915

12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS):

	o

13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):

	7.9%

14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS):

	PN, IA


CUSIP No.		247126105		Page		3		of		11


1	NAMES OF REPORTING PERSONS: Strand Advisors, Inc., a Delaware corporation

	I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY):
	95-4440863

2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS):
	(a) o
	(b) o

3	SEC USE ONLY:



4	SOURCE OF FUNDS (SEE INSTRUCTIONS):

	AF

5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e):

	o

6	CITIZENSHIP OR PLACE OF ORGANIZATION:

	Delaware

		7	SOLE VOTING POWER:

NUMBER OF			38,984,132

SHARES		8	SHARED VOTING POWER:
BENEFICIALLY
OWNED BY			5,272,783

EACH		9	SOLE DISPOSITIVE POWER:
REPORTING
PERSON			38,984,132

WITH		10	SHARED DISPOSITIVE POWER:

			5,272,783

11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:

	44,256,915

12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS):

	o

13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):

	7.9%

14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS):

	CO


CUSIP No.		247126105		Page		4		of		11


1	NAMES OF REPORTING PERSONS: James D. Dondero

	I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY):


2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS):
	(a) o
	(b) o

3	SEC USE ONLY:



4	SOURCE OF FUNDS (SEE INSTRUCTIONS):

	AF, PF

5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e):

	o

6	CITIZENSHIP OR PLACE OF ORGANIZATION:

	United States of America

		7	SOLE VOTING POWER:

NUMBER OF			44,078,632

SHARES		8	SHARED VOTING POWER:
BENEFICIALLY
OWNED BY			5,472,783

EACH		9	SOLE DISPOSITIVE POWER:
REPORTING
PERSON			44,078,632

WITH		10	SHARED DISPOSITIVE POWER:

			5,472,783

11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:

	49,551,415

12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS):

	o

13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):

	8.8%

14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS):

	IN


CUSIP No.		247126105		Page		5		of		11


1	NAMES OF REPORTING PERSONS: Highland Credit Strategies Fund, a Delaware trust (1)

	I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY):
	20-4948762

2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS):
	(a) o
	(b) þ

3	SEC USE ONLY:



4	SOURCE OF FUNDS (SEE INSTRUCTIONS):

	WC

5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e):

	o

6	CITIZENSHIP OR PLACE OF ORGANIZATION:

	Delaware

		7	SOLE VOTING POWER:

NUMBER OF			0

SHARES		8	SHARED VOTING POWER:
BENEFICIALLY
OWNED BY			3,653,116

EACH		9	SOLE DISPOSITIVE POWER:
REPORTING
PERSON			0

WITH		10	SHARED DISPOSITIVE POWER:

			3,653,116

11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:

	3,653,116

12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS):

	o

13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):

	0.7%

14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS):

	OO


(1)		The Reporting Persons may be deemed to be the beneficial owners of the shares of the Issuer’s Common Stock beneficially owned by the other Reporting Persons. However, Highland Credit Strategies Fund will not provide any financing or participate in the Proposal described in Item 4 hereto, so Highland Credit Strategies Fund expressly disclaims membership in a group with the other Reporting Persons with respect to the Proposal and other related matters described herein.


CUSIP No.		247126105		Page		6		of		11


1	NAMES OF REPORTING PERSONS: Highland Multi-Strategy Onshore Master SubFund, L.L.C., a Delaware limited liability company

	I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY):
	20-5237162

2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS):
	(a) o
	(b) o

3	SEC USE ONLY:



4	SOURCE OF FUNDS (SEE INSTRUCTIONS):

	WC

5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e):

	o

6	CITIZENSHIP OR PLACE OF ORGANIZATION:

	Delaware

		7	SOLE VOTING POWER:

NUMBER OF			0

SHARES		8	SHARED VOTING POWER:
BENEFICIALLY
OWNED BY			1,619,667

EACH		9	SOLE DISPOSITIVE POWER:
REPORTING
PERSON			0

WITH		10	SHARED DISPOSITIVE POWER:

			1,619,667

11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:

	1,619,667

12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS):

	o

13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):

	0.3%

14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS):

	OO


CUSIP No.		247126105		Page		7		of		11


1	NAMES OF REPORTING PERSONS: Highland Multi-Strategy Master Fund, L.P., a Bermuda limited partnership

	I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY):


2	CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS):
	(a) o
	(b) o

3	SEC USE ONLY:



4	SOURCE OF FUNDS (SEE INSTRUCTIONS):

	WC

5	CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e):

	o

6	CITIZENSHIP OR PLACE OF ORGANIZATION:

	Bermuda

		7	SOLE VOTING POWER:

NUMBER OF			0

SHARES		8	SHARED VOTING POWER:
BENEFICIALLY
OWNED BY			1,619,667

EACH		9	SOLE DISPOSITIVE POWER:
REPORTING
PERSON			0

WITH		10	SHARED DISPOSITIVE POWER:

			1,619,667

11	AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:

	1,619,667

12	CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS):

	o

13	PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11):

	0.3%

14	TYPE OF REPORTING PERSON (SEE INSTRUCTIONS):

	PN

This Amendment No. 2 to Schedule 13D relates to the common stock, par value $0.01 per share (“Common Stock”), of Delphi Corporation, a Delaware corporation (the “Issuer”), and is being filed on behalf of (i) Highland Capital Management L.P., a Delaware limited partnership (“Highland Capital”); (ii) Strand Advisors, Inc., a Delaware corporation (“Strand”); (iii) James D. Dondero; (iv) Highland Credit Strategies Fund, a Delaware trust (“HCF”); (v) Highland Multi-Strategy Onshore Master SubFund, L.L.C., a Delaware limited liability company (“SubFund”); and (vi) Highland Multi-Strategy Master Fund, L.P., a Bermuda limited partnership (“Master Fund” and, collectively, the “Reporting Persons”), to amend the Schedule 13D that was originally filed with the Securities and Exchange Commission (the “Commission”) on December 22, 2006, as amended by Amendment No. 1 to Schedule 13D filed with the Commission on January 5, 2007.

Except as set forth below, all previous Items are unchanged. Capitalized terms used herein which are not defined herein have the meanings given to them in the Schedule 13D previously filed with the Commission.

Item 4. Purpose of Transaction.

Item 4 is supplemented as follows:

On January 9, 2007, Highland Capital delivered a letter to the Board of Directors of the Issuer, a copy of which is attached hereto as Exhibit 4 (the “Letter to the Board”) and incorporated by reference herein, in order to inform the Board of Directors of the actions that Highland Capital has been taking in furtherance of and with respect to the Proposal. As indicated in the Letter to the Board, Highland Capital believes the Proposal (i) provides a superior alternative to the Appaloosa/Cerberus Proposal, (ii) is in the best interests of the Issuer and its various creditors, stockholders and other parties in interest, and (iii) sets forth a transaction that should be seriously considered by the Board of Directors and its financial advisors and that this Proposal is should not only be approved by the Board of Directors, but should be implemented.

The Letter to the Board also explains that Highland Capital has expended tremendous efforts in a very short time period with respect to the Proposal, but believes that the response it has received from the Issuer and its representatives to date has been less than receptive to allow the Issuer to properly consider the Proposal. For example, the Letter to the Board highlights that Highland Capital and the Issuer have negotiated the terms of a Confidentiality Agreement for ten days, but the Issuer’s management and legal counsel insist upon including standstill provisions which would require Highland Capital to stop the steps it has begun to take in furtherance of the Proposal and significantly delay, if not prevent, Highland Capital from being able to consummate the Proposal.

Further, the Letter to the Board explains that in order to proceed with the Proposal expeditiously and efficiently, Highland Capital has (i) hired a financial advisor in connection with a potential restructuring transaction involving the Issuer, (ii) delivered a legal, financial and insurance due diligence request list, and (iii) begun discussions with automotive industry and union experts that could act as a liaison with General Motors and the unions. As such, with the Issuer’s cooperation, Highland Capital is willing to consummate the Proposal expeditiously and within the same timetable as the Appaloosa/Cerberus Proposal. However, Highland Capital cannot proceed without a Confidentiality Agreement. Therefore, Highland Capital has requested that the Board of Directors instruct management to cooperate with Highland Capital so the Board of Directors has the opportunity to consider fully and discuss both proposals with its financial advisors before proceeding with a transaction that is not in the best interest of all of the stakeholders.

The Letter to the Board also addresses the Issuer’s request to evaluate Highland Capital’s involvement in (i) certain disputes with General Motors Corporation regarding Amcast Industrial Corporation, (ii) certain disputes with the former board of directors of Motient Corporation, and (iii) various lawsuits cited by Motient involving Highland Capital and/or James D. Dondero and third parties. Although Highland Capital believes these types of questions inappropriately shift the focus away from the deficiencies of the Appaloosa/Cerberus Proposal when

compared to the Proposal, Highland Capital provided the requested additional information to address these concerns to the extent possible, given that some of the matters relate to ongoing litigation.

As explained in the Letter to the Board, over the years, many of the debt issuers in which Highland Capital and its affiliates have invested have filed for bankruptcy and Highland Capital, and its affiliates, like other similarly structured distressed investment managers, have simply sought to protect their interests (and others who are similarly situated) through the U.S. bankruptcy system and through court proceedings. Many of the suits Highland Capital is party to relate to bankruptcy-related proceedings arising from Highland Capital’s normal distressed investment-related activities. The fact that Highland Capital is a party to various proceedings demonstrates its commitment to its investors and the companies in which it invests, along with its desire to maximize investment returns. These are all goals that are synonymous with what the Issuer and the Board of Directors are attempting to achieve for stockholders. Given Highland Capital’s thirteen plus years of operation, and its over $35 billion in assets under management, Highland Capital views its involvement in these lawsuits as inconsequential and unremarkable.

On January 9, 2007, Highland Capital also delivered drafts to the Issuer of the New Equity Agreement and the New Plan Agreement to illustrate Highland Capital’s commitment to proceeding quickly with a transaction and to evidence that the terms under which Highland Capital is prepared to proceed are substantially similar to the terms of the Appaloosa/Cerberus Proposal.

Further, Highland Capital has engaged Loughlin Meghji & Company to provide consulting and financial advisory services in connection with the Proposal. In addition, Highland Capital has engaged Peter Pestillo, a former Ford Motor Company executive, as its advisor in connection with the Proposal.

In a hearing which began on January 11, 2007, and concluded on January 12, 2007, the United States Bankruptcy Court for the Southern District of New York heard the Issuer’s motion seeking Bankruptcy Court approval of the equity investment and plan framework agreements underlying the Appaloosa/Cerberus Proposal. Highland Capital appeared at such hearing and argued that the Issuer should be obligated to discuss and consider alternative plan arrangements, including the Proposal. However, on January 12, 2007, the Bankruptcy Court for the Southern District of New York approved the definitive documentation underlying the Appaloosa/Cerberus Proposal.

Highland Capital is disappointed by such ruling. Highland Capital believes the Appaloosa/Cerberus Proposal approved today is unfair, because it gives Appaloosa and Cerberus disproportionate equity ownership in the Issuer and a value transfer of approximately $1 billion at the expense of the Issuer’s current stockholders. Highland Capital also believes that the Appaloosa/Cerberus Proposal is unjust because it allocates equity ownership and upside before any deal is struck with the unions or GM. However, Highland Capital appreciates that the Bankruptcy Court stated it believes that Highland Capital has made a bona fide proposal. Highland Capital believes it is clear that the Proposal is superior and fair in that it pays all creditor claims in full and in cash, retains equity value for the Issuer’s common shareholders and establishes good corporate governance at the company. Highland Capital will now consider all of its options related to its significant investment in the Issuer and reserves the right to pursue alternative courses of action, including actions that could involve one or more of the types of transactions or have one or more of the results described in paragraphs (a) through (j) of Item 4 of Schedule 13D or formulate and implement plans or proposals with respect to any of the actions described in the Schedule 13D filed with the Commission on December 22, 2006.

Item 7. Material to be Filed as Exhibits.

Item 7 is hereby supplemented as follows:


Exhibit 4		Letter from Highland Capital Management, L.P., dated January 9, 2007, to the Board of Directors of Delphi Corporation.

SIGNATURES

After reasonable inquiry and to the best of my knowledge and belief, the undersigned certifies that the information set forth in this Schedule 13D is true, complete and correct.

Date: January 12, 2007


Highland Credit Strategies Fund
By:	/s/ James Dondero
	Name:	James Dondero
	Title:	President

Highland Capital Management, L.P.
By:	Strand Advisors, Inc., its general partner


By:	/s/ James Dondero
	Name:	James Dondero
	Title:	President


Strand Advisors, Inc.
By:	/s/ James Dondero
	Name:	James Dondero
	Title:	President


	James Dondero
		/s/ James Dondero


		Highland Multi-Strategy Onshore Master SubFund, L.L.C.

		By:		Highland Multi-Strategy Master Fund, L.P., its managing member
		By:		Highland Multi-Strategy Fund GP, L.P., its general partner
		By:		Highland Multi-Strategy Fund GP, L.L.C., its general partner
		By:		Highland Capital Management, L.P., its sole member
		By:		Strand Advisors, Inc., its general partner



By:	/s/ James Dondero
	Name:	James Dondero
	Title:	President


		Highland Multi-Strategy Master Fund, L.P.
		By:		Highland Multi-Strategy Fund GP, L.P., its general partner
		By:		Highland Multi-Strategy Fund GP, L.L.C., its general partner
		By: By:		Highland Capital Management, L.P., its sole member Strand Advisors, Inc., its general partner



By:	/s/ James Dondero
	Name:	James Dondero
	Title:	President

EXHIBITS



Exhibit 1		Letter from Highland Capital Management, L.P., dated December 21, 2006, to the Board of Directors of Delphi Corporation (Exhibit 1 to Schedule 13D filed with the Securities and Exchange Commission on December 22, 2006 and incorporated by reference herein).

Exhibit 2		Joint Filing Agreement, dated as of December 22, 2006, by and between the Reporting Persons (Exhibit 2 to Schedule 13D filed with the Securities and Exchange Commission on December 22, 2006 and incorporated by reference herein).

Exhibit 3		Letter from Highland Capital Management, L.P., dated December 29, 2006, to the Board of Directors of Delphi Corporation (Exhibit 3 to Amendment No. 1 to Schedule 13D filed with the Securities and Exchange Commission on January 5, 2007 and incorporated by reference herein).

Exhibit 4		Letter from Highland Capital Management, L.P., dated January 9, 2007, to the Board of Directors of Delphi Corporation.

EX-99.4 2 d42722exv99w4.htm LETTER exv99w4

EXHIBIT 4

13455 Noel Road, Suite 800

Two Galleria Tower

Dallas, TX 75240

January 9, 2007

Via E-mail

Board of Directors
Delphi Corporation
5725 Delphi Drive
Troy, Michigan 48098

Gentlemen:

We wanted to take this opportunity to inform you of the actions that Highland Capital Management, L.P. (“Highland Capital”) has been taking, on behalf of itself and certain of its affiliates and related entities, in furtherance of and with respect to that certain binding proposal and commitment (the “Proposal”) for a purchase of common equity to Delphi Corporation (“Delphi”) and certain of its United States subsidiaries and affiliates (collectively, the "Company”) that are Chapter 11 Debtors in Possession in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) as set forth in the binding Proposal and Commitment Letter for up to $4.7 Billion Common Equity Commitment, dated as of December 21, 2006 (the “Commitment Letter”).

As stated in the Commitment Letter, we believe the Proposal provides a superior alternative to the proposal (the “Appaloosa/Cerberus Proposal”) made by Appaloosa Management, L.P., Cerberus Capital Management, L.P., Harbinger Capital Partners Master Fund I, Ltd., Merrill Lynch & Co. and UBS Securities, LLC. and supported by Delphi. We believe the Proposal is in the best interests of the Company and its various creditors, stockholders and other parties in interest, including, most importantly, its common stockholders. The deficiencies in the Appaloosa/Cerberus Proposal were highlighted in our Commitment Letter and have been further highlighted by the objections to the Appaloosa/Cerberus Proposal filed with the Bankruptcy Court by numerous parties in interest. We believe the Proposal sets forth a transaction that should be seriously considered by the Board of Directors and its financial advisors and that actions should be implemented by the Company in order to make sure this Proposal is not only approved by the Board of Directors but implemented.

Although we have expended tremendous efforts in a very short time period, we believe the responses we have received from the Company and its representatives to date have been less than receptive for the Company to be able to properly consider our Proposal. In particular, for the past ten days, we have attempted to enter into a fair and reasonable confidentiality and nondisclosure agreement, but the Company’s management and legal counsel have insisted upon the inclusion of standstill provisions that we believe are inappropriate given the nature of the Proposal and the on-going proceedings in the Bankruptcy Court. Although we have been able to agree upon the necessary confidentiality provisions, the standstill provisions being proposed by the Company and its legal counsel would mean that Highland Capital would have to stop the steps that it has begun to take in furtherance of the Proposal and significantly delay, if not prevent, Highland Capital from being able to consummate the Proposal. We have even delivered an executed confidentiality agreement in a form that we believe is fair

and reasonable to the Company in an attempt to move the process forward and will be sending another revised draft of the confidentiality agreement to the Company’s legal counsel (in response to a draft we received late last night) today that we believe will more accurately reflect the agreements reached by the Company and Highland Capital on Sunday, January 7, 2007. Additionally, in furtherance of our Proposal, please also note that our counsel today is providing drafts of the Equity Purchase and Commitment Agreement and the Plan Framework and Support Agreement to the Company and its counsel. We believe these agreements demonstrate the superior nature of the Proposal and our commitment to proceed expeditiously to definitive documentation.

In order to proceed expeditiously and efficiently with respect to our Proposal, we have hired Loughlin Meghji & Company as a consulting financial advisor. Additionally, we promptly delivered legal, financial and insurance due diligence request lists on Friday, January 5, 2007 to the Company and its counsel and stated in writing our willingness and ability (starting this weekend) to complete such due diligence within sixty (60) days of the date that the Company first makes the information available to us. Further, we have already begun discussions with automotive industry and union experts that could serve as a liaison with both General Motors Corporation and the unions. With the appropriate level of cooperation from the Company and its management, we are ready, willing and able to consummate the Proposal expeditiously and within the Company’s timetable and the same timetable as the Appaloosa/Cerberus Proposal (given their unilateral due diligence out), although we can not proceed without a confidentiality agreement. We hope that our recent actions demonstrate our continued commitment to the Proposal and respectfully request that the Board instruct the Company and its management to cooperate with us (starting with the execution of an appropriate confidentiality agreement) in order to ensure that the Board has the opportunity to consider fully and discuss both proposals with its advisors before proceeding with a transaction that is not in the best interests of all stakeholders of the Company.

There have been suggestions made by the Company and its counsel that the Proposal is not executable. Again, Highland Capital does not agree with this assessment and has addressed each concern when raised. With respect to new concerns that were just raised in an e-mail message to our counsel on Monday, January 8, 2007, Company counsel indicated that you are interested in evaluating Highland Capital’s involvement in (i) certain disputes with General Motors Corporation (“GM”) regarding Amcast Industrial Corporation (“Amcast”), (ii) certain disputes with the former board of directors of Motient Corporation (“Motient”), and (iii) various lawsuits cited by Motient involving Highland Capital and/or James D. Dondero and third parties. We cannot understand what these concerns have to do with our Proposal. Instead, we believe these types of questions inappropriately shift the focus away from the deficiencies of the Appaloosa/Cerberus Proposal when compared to the Proposal. However, we provide the following additional information with respect to this request to address these concerns. Please note that we cannot reveal all of the specific details of each, as many of the matters are ongoing. Additionally, the information we are providing you with in regards to these matters is highly confidential, and we ask that you not share it with any other parties (other than your legal advisors and management) without our prior written consent.

GM and Amcast

The current pending disputes between Amcast, GM and Highland Capital are unrelated and do not impose any risk with regard to the Proposal made by Highland Capital to Delphi. There is no connection whatsoever between Highland Capital’s involvement in Amcast and Highland Capital’s involvement in Delphi. Highland Capital’s disputes with GM arose from a fact intensive situation involving a commercial dispute between Amcast and GM. Following two unilateral price reductions by GM, the board of directors of Amcast reached the conclusion that it could not continue to provide product

to GM at a loss. Amcast made numerous attempts to negotiate fair pricing or other offsets without success. As a result, Amcast was ultimately forced into liquidation.

Certain investment funds managed by Highland Capital became the largest shareholders in Amcast when it emerged from chapter 11 on August 2, 2005, pursuant to a plan of reorganization confirmed by the Ohio bankruptcy court. The plan of reorganization reduced Amcast’s prepetition secured debt from approximately $108 million to $54 million and, in return for this meaningful concession provided by the bank group, funds managed by Highland Capital and other lenders received one-hundred percent of the equity in a reorganized Amcast.

Highland Capital devoted substantial time and resources to providing guidance and advice to Amcast’s senior management team on such issues as fixing Amcast’s remaining cost structure deficiencies, as well as growing Amcast’s business relationship with GM and other OEM’s. Unfortunately, Amcast never had a chance to regain profitability. Amcast experienced further difficulty within only days of emerging from chapter 11 due to the fact that GM, despite having assured Amcast that it could bid on future business upon emerging from chapter 11 and GM would agree to certain price increases, immediately (i) sought price reductions that forced Amcast to sell products below cost; (ii) insisted upon increased volumes with regard to unprofitable programs; (iii) delayed the launch of a profitable program that was going to provide a big part of Amcast’s EBITDA for 2006 and 2007, as set forth in the disclosure statement filed with the Ohio bankruptcy court; and (iv) told Amcast that GM would not be a “good” customer for Amcast and that Amcast would not be able to bid on future business, prior to demanding that Amcast train the foreign manufacturers that GM planned to use to replace Amcast because such manufacturers did not have satisfactory quality runs. It was evident to Amcast that GM did not have any long term plans for Amcast.

Amcast attended several face to face meetings with GM to discuss Amcast’s cost structure, to gain pricing concessions from GM on current programs and to discuss future business to sustain Amcast. These meetings were unproductive. As a result, Amcast was forced to take drastic, but commercially reasonable steps to liquidate on the most favorable terms possible for Amcast and its stakeholders. Amcast had no choice but to file for chapter 11 again on December 1, 2005 in Indianapolis, Indiana. As part of its rights as a debtor-in-possession, Amcast declined to ship product to GM unless the pre-petition contract prices were increased to provide for a reasonable profit to Amcast and its stakeholders. The Indiana bankruptcy court entered an order on December 21, 2005 in which it ordered GM to pay the increased prices through June 30, 2006. GM did not appeal the order, but preserved its rights to seek a price reduction for any product shipped after April 1, 2006.

GM never experienced an interruption in its supply chain as a result of Amcast’s liquidation. GM was able to transition its products to replacement suppliers without any interruption due in large part to the cooperation provided by Amcast. Amcast even provided critical inventory banks for parts that GM was not ready to transition to replacement suppliers by June 30, 2006. Despite this, GM initiated, and continues to prosecute, what we believe is, unwarranted litigation against the lenders (including Highland Capital) for: (i) recharacterization of the secured debt that was specifically blessed and recognized by the Ohio bankruptcy court, (ii) equitable subordination, and (iii) tortious interference with the purchase orders between GM and Amcast.

Highland Capital believes it acted appropriately in all respects with regard to Amcast and has vigorously defended GM’s claims thus far. Highland Capital also believes that none of the Amcast-related matters will affect the consummation of the Proposal.

Motient

Highland Capital through certain of its affiliates and related entities (collectively, the "Highland Parties”) began acquiring Motient’s securities in 1998 prior to Motient’s emergence from chapter 11. Eventually, these Highland Parties beneficially owned approximately 9,024,326 shares of Motient common stock, representing approximately 14.3% of Motient’s issued and outstanding common stock. In 2004, Motient began raising capital through the sale of securities pursuant to various private placement transactions. After acquisition of these securities, the Highland Parties questioned the appropriateness of certain actions regarding the last of these private placement transactions being taken by the board of directors of Motient and raised concerns to the board of directors of Motient. The Highland Parties believe that more than $70 million of value was diverted from Motient to insiders and related entities. The Highland Parties believed that litigation, and reporting these matters to the SEC, was the only way to drive certain individuals and members of the board of directors away from Motient and to prevent further diversion of value that was contemplated in a roll-up transaction.

After these concerns went unaddressed, Highland Legacy Limited, one of the Highland Parties, commenced a derivate action against Motient and certain individuals and entities related to these concerns. Additionally, certain Highland Parties commenced a lawsuit seeking a rescission of the April 2005 private placement transaction through which they had purchased Motient securities. Despite the lawsuits and the continued efforts of the Highland Parties and Mr. Dondero to highlight actions that were inconsistent with the fiduciary duties owed by the board of directors and management to Motient, including the duties of care, loyalty, utmost good faith and fair dealing, the actions remained unrectified and the management continued to act in a manner that the Highland Parties felt was detrimental to all of the stockholders of Motient. Following extensive efforts by Highland Capital, Motient in late 2005 aborted its plans to pursue what Highland Capital believed to be a conflicted transaction and in 2006 replaced the entire board of directors and management of Motient in the face of a proxy contest led by Highland Capital.

The Highland Parties at all times acted in what they believed to be the best interests of Motient and all of its stockholders. The Highland Parties and Highland Capital are committed to maximizing their investors’ interest in every company in which Highland Capital or its affiliates or related entities invest. Highland Capital does not feel that the Motient matter should in any way impact your consideration of the Proposal. Again, the Proposal is reflective of Highland Capital’s desire to promote transactions which are in the best interests of all stakeholders.

Lawsuits Mentioned by Motient

Your counsel noted that Highland Capital appears to have been involved in numerous lawsuits. As you know, Highland Capital is an SEC-registered investment adviser specializing in credit, alternative investing and equity investments. Highland Capital currently manages approximately $35 billion (over 2000 individual investments) in leveraged loans, high yield bonds, structured products, distressed assets, equity investments and other assets for banks, insurance companies, pension plans, foundations, and endowments. The vast majority of these investments are in the form of senior secured debt of U.S.-based companies. Over the years, many of the debt issuers in which Highland Capital and its affiliates have invested have filed for bankruptcy and Highland Capital, and its affiliates, like other similarly structured distressed investment managers, have simply sought to protect their interests (and others who are similarly situated) through the U.S. bankruptcy system and through court proceedings. This is common practice for like-minded distressed managers and investors. Of the 53 suits noted in the past Motient correspondence, the vast majority relate to bankruptcy-related proceedings arising from Highland Capital’s normal distressed investment-related activities. Highland Capital views these actions as evidence of its resolve to maximize value for investors when faced with bankrupt issuers. The remaining

actions involved matters that Highland Capital believes arose in the ordinary course of its business, including (i) personnel issues at Highland Capital, (ii) trading disputes with brokerage firms and (iii) miscellaneous vendor disputes. Given our thirteen plus years of operation, our over $35 billion in assets under management, Highland Capital views its involvement in these 53 lawsuits as inconsequential and unremarkable.

We believe the fact that Highland Capital is a party to various proceedings demonstrates its commitment to its investors and the companies in which it invests, along with its desire to maximize investment returns. These are all goals that are synonymous with what Delphi and its Board of Directors are attempting to achieve for stockholders.

We are available at any time to meet with the Board or representatives of the Board regarding this Commitment and look forward to the opportunity to address any additional questions or concerns you might have.


Very truly yours, HIGHLAND CAPITAL MANAGEMENT, L.P.
By:	/s/ James D. Dondero
Name:		James D. Dondero
Title:		President


cc:		Mr. Robert “Steve” Miller, Chairman Mr. Rodney O’Neal, President and Chief Executive Officer Mr. John Sheehan, Chief Restructuring Officer

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