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Delphi Still Churning in Court


 

Delphi Corporation said that the Bankruptcy Court of the Southern District of New York has adjourned hearings on the company's motions to set aside its labor contracts as the company's efforts to restructure continue to inch ahead.

Delphi's lawyers said the company needed additional time for discussions with creditors, eight different unions, General Motors, and hedge fund speculators who bought up substantial block of the company's stock before it filed for bankruptcy. Observers expect some kind of settlement this month.

In addition, Delphi also reported in a court filing that it had lost $533 million in August, as a result of cost associated with employee buyouts. Through August, Delphi losses for the year totaled $3.7 billion.

More than 20,000 of Delphi's production workers, represented by the United Auto Workers and International Union of Electrical Workers-Communications Workers of America, have signed up for early retirement or buyouts. Delphi had roughly 27,500 production workers on its payroll as of June 30. Some 13,800 members of the UAW and 6300 members of the IUE have opted for buyouts or early retirements, Delphi said. All of the workers accepting the buyout will be off the Delphi payroll no later than Jan. 1 and will be replaced by hundreds of lower-paid temporary workers. Several hundred Delphi workers are in the process of transferring back to GM, where they were hired prior to the 1999 spinoff that created Delphi .

 

John Murphy, an analyst with Merrill Lynch, said in research note that the buyouts have reduced the chances of a strike that could do serious damage to GM. However, UAW President Ron Gettelfinger has refused to rule out a strike at this point.

Meanwhile, the company also is moving head with plans to sell or shutter 21 of its 29 U.S. plants, Delphi officials said.

Reports also indicate that the Packard Electric complex in Michigan, which Delphi previously had identified as part of the core business, could now be closed because so many workers had opted to retire. In addition, potential buyers — among them a group of investors linked to Roger Penske — are lining up to buy the Saginaw Steering Gear operation in Saginaw, Mich.

Meanwhile, the unions representing Delphi employees continue to resist any effort to nullify their labor contracts and insist any move in that direction could lead to a strike that would shut off the flow of Delphi-made parts to General Motors Corp. Delphi officials, however, have said repeatedly they prefer to reach a "consensual" agreement with the UAW and other unions. Delphi also is under pressure from GM to negotiate a settlement with the unions.

As a practical matter, Delphi already has a new union contract since the temporary workers have been brought in on the second tier of a two-tier contract with substantially smaller wages and benefits than their predecessors. The second tier, which was negotiated in 2004, extends until 2011. The older or first-tier contract expires in September 2007 and the unions have opposed any effort to change its basic terms.

Bankruptcy Judge Robert Drain has scheduled another conference on October 19 to discuss the status and scheduling hearings on Delphi's original motion to nullify the labor, which was filed last March.

A spokesman for the United Auto Workers said that the union was prepared to present its arguments against canceling the contracts to Judge Drain. The hearings were suspended in June after Delphi presented its case for canceling its labor contracts.

 

Before the postponement, the unions were scheduled to begin arguing their case against the cuts Sept. 18. Part of the union's case is that Delphi no longer needs contract relief because so many of the company's employees have quit or retired in the past year.

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