Delphi Deadline Draws Near

Sweeping Buyout Planned at GM by Joseph Szczesny (3/24/2006)
UAW agrees to cuts at company, Delphi.

 

GM, UAW Reach Delphi Deal by TCC Team (3/22/2006)
Sweeping buyouts to help GM right Delphi, job cuts.
 

The bankrupt Delphi Corp. faces some critical choices this week as the deadline for revising its labor agreement with the United Auto Workers fast approaches. 

 

Even though the UAW has agreed to a buyout deal, Delphi still has to come to an agreement with the UAW and the other unions on revisions to the existing contracts on wages and benefits. Robert ‘Steve’ Miller, Delphi’s chairman and chief executive officer, said last month that if there is no deadline by March 30 he would have no choice but to petition the bankruptcy judge to have the existing contracts set aside.

 

Meanwhile, UAW officials from president Ron Gettelfinger on down have been signaling for past couple of weeks there was no way they could meet the deadline imposed by Miller. The UAW, with help from GM, did succeed in negotiating a buyout agreement that will allow some 13,000 UAW members employed by Delphi to retire or quit with a cash settlement of between $70,000 and $140,000. In addition, Delphi also appears to be on verge of buyout agreements with two other unions, the IUE-CWA and United Steel Workers, that would help it eliminate the jobs of another 4000 blue-collar workers, meaning that Delphi is on the verge of cutting its blue-collar workforce by more than half.

In addition, another 5000 UAW members could be eligible to transfer back to GM, meaning another large cut in the size of Delphi’s workforce to around 10,000 to 12,000 workers after downsizing.

Delphi says it will still need to reduce the wages of the workers left behind after the buyouts take hold. The discussions with the unions on the second part of Delphi’s turnaround equation are still underway.  Lindsey Williams, a Delphi spokesman, emphasized the discussions on new contracts have never really stopped and the company still wants them wrapped up this week. Delphi’s position is that it will go to court with the petition if there is no agreement, Williams said.

Miller could use the buyout agreement as symbol of the good faith and sound judgment on the part of the unions, and delay the filing of the petition asking for the judge to terminate the existing labor agreement. This is the course that the unions — and General Motors, which is also participating in the talks — seem to prefer.

However, Delphi is losing something like $125 million per month and judging from the financial report for January that it filed with the bankruptcy court, its overseas operations are not all that robust right now. In addition, Miller has basically said this was the final deadline and already is coming under fire from hedge fund managers who suggest he is letting the union call the shots in the company’s restructuring. Miller, who has cast himself as the savior of the American auto industry, enjoyed the tough-guy role he played last fall and probably doesn’t want to be reduced to the role of paper tiger or just another spear-carrier in GM’s operatic restructuring.

On the other hand, filing the petition for contract relief with the bankruptcy judge could disrupt the delicate discussions that are now underway. At the very least, the unions will be required to halt the negotiations at least for a few days.

The filing also could anger Delphi’s workforce, which was deeply offended by the tough rhetoric Miller used last fall when he described them as overpaid by standards prevailing across the auto parts sector in the U.S. and around the world. Gettelfinger vowed last fall that the union would strike if Delphi had a judge impose a contract that included deep cuts in pay and benefit.

Some in the press have talked up the possibility of wildcat strikes or local walkouts, but it appears the union has maintained a pretty tight grip on those kind of potentially disruptive notions.

Miller’s tough language, though, has helped create a dissident movement inside the Delphi ranks that is vowing to fight any kind of concessions at ratification. The anti-concession sentiment inside the union is strong enough that the UAW’s top leadership is uncertain it could get the so-called “consensual” agreement ratified without an exhausting, all-out fight with dissidents.  Sean McAlinden, chief economist for the Center For Automotive Research in Ann Arbor, says the buyouts could help defuse the dissident movement by drawing some of the hardliners into retirement and away from a confrontation with Miller and Delphi.

Last week, the dissidents were already attacking the buyouts as a bad deal for workers, cutting many of the gains and wages benefits for which the UAW and other unions had struggled over the years.

The UAW also indicated that even if does go along with a revised labor agreement, it will want some major concessions on bringing work back into the U.S. from places such as Mexico and China, where Delphi has extensive operations.