August 26, 2002
Jonathan G. Katz
Secretary, Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549-0609
Re: Proposed Rule: Additional Form 8-K Disclosure Requirements and Acceleration of Filing Date
Dear Mr. Katz:
Delphi Corporation respectfully submits this correspondence communicating our position on the above noted proposed rule. We support the Securities and Exchange Commission's initiative to improve the delivery of timely, high-quality information to the securities markets to ensure that securities are traded on the basis of all currently available information. We believe the proposed rule will strengthen the flow of current information to the securities markets and, accordingly, support its issuance.
Specifically, we agree that the items proposed to be included in Form 8-K have or can have such significance that timely disclosure is necessary for the market to perform properly and efficiently. Additionally, we believe that the proposed accelerated reporting of these events is reasonable and will improve the disclosure of "real time" information to investors. Therefore, we support the proposed rule adopting changes to Form 8-K and accelerated reporting of these events.
We do, however, have several comments to the questions posed by the Commission. First, with respect to Item 1.01, while we believe that it would be beneficial to accelerate the disclosure of definitive material information, we believe that disclosures of letters of intent and other non-binding agreements would not be beneficial. Such non-binding agreements are often executed relatively early in the course of discussions/negotiations between parties to potential transactions. The purpose of these types of agreements typically is to establish an agreed-upon broad basis for further, more specific discussions/negotiations. Accordingly, at the time such non-binding agreements are executed, the probability that the subject transactions will actually be consummated is often quite low. Thus, disclosure of letters of intent and other non-binding agreements could have the effect of publicly announcing companies' strategic direction and tactical initiatives far in advance of companies' ability to execute the potentially competitively sensitive actions that are the subject of such non-binding agreements. Public disclosure of potential transactions could also unfavorably affect negotiating positions. We believe that most companies would choose not to execute letters of intent and other non-binding agreements where disclosure would result in such negative consequences. Accordingly, requiring disclosure of these types of agreements could simply have the effect of depriving companies of the benefits of these agreements.
Next, we strongly recommend that the term "material" be specifically defined through a financial measure (e.g., in proposed Items 1.01, 1.02 and 2.03 through 2.06). Although we understand that certain agreements can be material for reasons other than the monetary amount involved, we believe that a specific definition is appropriate for determining disclosure under Form 8-K.
Finally, we are concerned that disclosure of certain items could cause competitive harm. For example, the smaller of two parties to an arrangement may be required to disclose the arrangement under proposed Item 1.01 of Form 8-K due to the materiality of the arrangement and the size of the parties involved. However, disclosure of the arrangement may cause competitive harm to the larger party, due to the specifics of the arrangement. In such situations, we would propose that the Commission allow minor modifications to the disclosed arrangement to maintain a level of confidentiality, while still requiring disclosure of the arrangement itself.
Please contact us if you desire further input or clarification at (248) 813-2605.
John D. Sheehan
Chief Accounting Officer and Controller