- The Washington Times - Friday, March 31, 2006

DETROIT (AP) — Auto parts supplier Delphi Corp. announced a broad restructuring plan yesterday that would cut 8,500 salaried jobs and shut a third of its plants worldwide, and asked a bankruptcy court judge to void its labor agreements in a move that sent a shudder through the auto industry.

The United Auto Workers warned “it will be impossible to avoid a long strike” if the judge agrees to void the contracts and Delphi imposes its most recent wage proposal. A strike could put General Motors Corp., Delphi’s former parent and largest customer, perilously close to bankruptcy and hurt other automakers and smaller suppliers as well.

GM and Delphi have strong ties. GM accounted for just under half of Delphi’s $26.9 billion in revenue last year, and is required to pay some of Delphi’s pension obligations if Delphi is in bankruptcy. The world’s largest automaker already is struggling with declining U.S. market share and spiraling costs. It also is in the midst of its own restructuring. In a recent note to investors, Merrill Lynch analyst John Murphy estimated a Delphi strike could cost GM up to $130 million per day.

“We disagree with Delphi’s approach, but we anticipated that this step might be taken,” said Rick Wagoner, GM’s chairman and chief executive officer. “GM expects Delphi to honor its public commitments to avoid any disruption to GM operations.”

GM said it will continue negotiating with Delphi and its unions on a wage agreement. But the UAW, which represents 24,000 of Delphi’s 33,000 U.S. hourly workers, said the company’s move could stall talks.

“Indeed, today it appears there is no basis for continuing discussions,” the UAW said.

“Delphi’s misuse of the bankruptcy procedure to circumvent the collective-bargaining process and slash jobs and wages and drastically reduce health care, retirement and other hard-won benefits or eliminate them altogether is a travesty and a concern for every American,” the union said.

Delphi filed a separate motion asking the court to reject some unprofitable contracts with GM. The company also said it will freeze its hourly and salaried pension programs later this year and move employees into a defined-contribution plan.

“We are clearly focused on Delphi’s future,” Delphi Chairman and CEO Robert S. “Steve” Miller said. “Emergence from the Chapter 11 process in the U.S. requires that we make difficult, yet necessary, decisions.

Troy, Mich.-based Delphi filed for bankruptcy in October and intends to emerge from bankruptcy during the first half of 2007. To meet that goal, it plans to shed certain product lines and sell or close non-core plants by 2008, including 21 of its 29 U.S. plants.

But unions could stand in its way. The International Union of Electronic Workers-Communications Workers of America, which represents 8,000 Delphi hourly workers, has already voted to strike if the contracts are thrown out, and the UAW could do the same.

Delphi’s motion to void its labor contracts was widely expected; the company had delayed similar motions three times previously. The company says it was saddled with uncompetitive labor agreements when it was spun off from GM in 1999. In its court filing, it says it pays workers $78.63 per hour in wages and benefits, or more than three times more than the average auto supplier.

Delphi, GM and its unions spent months negotiating but couldn’t reach a wage agreement.

Under its most recent proposal, which was rejected by the UAW and other unions, Delphi proposed dropping pay for current hourly workers to $22 per hour from $27 per hour through September 2007, then to $16.50 an hour.

Delphi said it plans to keep negotiating with GM and its unions, and some analysts said the added urgency could help the parties reach a deal.

Judge Robert Drain has scheduled a hearing on Delphi’s request for May 9-10 and won’t decide whether to void Delphi’s contracts until after that hearing.

If Judge Drain allows Delphi to void its contracts, Delphi would still have to take the step of throwing them out before the unions could strike, although the company already faces the threat of unauthorized strikes and worker slowdowns.

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