Breaking News: Delphi and Unions Collide

March 30, 2006

The day of reckoning has come. With its two key unions, the UAW and IUE, rejecting demands for massive pay cuts, bankrupt auto supplier Delphi has gone back to court. It is seeking to have its labor contracts voided, while also cutting thousands of jobs. Union officials, meanwhile, are passing out picket signs and getting ready to declare a war that could result in serious collateral damage. The biggest impact would likely be felt by General Motors, whose North American plants, some analysts predict, would be shut down by parts shortages within days. But other manufacturers, including the Japanese giant, Toyota, may also be seriously impacted.

Stay with as we post regular updates on the drama at Delphi.

goes to court to break union contracts.

CEO Robert 'Steve' Miller made good on his threat to ask the bankruptcy court in New York to cancel the company’s labor contracts with the United Auto Workers and five other unions. As promised the UAW responded by halting discussions with the bankrupt supplier and reiterating that it will strike if the judge allows Delphi to change the compensation of its production workers. The preliminary reorganization plan also calls for closing 21 of  Delphi's 29 plants in the U.S. and effectively eliminating thousands of jobs among its 34,000 hourly employees. Delphi had warned in February it would ask the banrkuptcy court to void its existing contract if it could not reach an agreement on revised contracts by the end of March. Talks aimed at revising the existing contract reached an impasse this week,  union officials said.

Ron Gettelfinger, the UAW president, said Delphi's decision ended any hopes of a settlement that had blossomed last week when the company and the union agreed on buyout plan that would allow 13,000 workers to retire and another 5,000 to transfer back to GM. “Unfortunately, Delphi’s filing of its 1113/1114 motions kills that momentum. Indeed, today it appears there is no basis for continuing discussions," Gettelfinger said.

“In the event the court rejects the UAW-Delphi contract and Delphi imposes the terms of its last proposal, it appears that it will be impossible to avoid a long strike," he added.  “The UAW has worked diligently in good faith to resolve the Delphi situation through collective bargaining instead of through a lawyer-driven court process or confrontation. Regrettably, Delphi has chosen another path,”  Gettelfinger's statement said. Earlier this week, the investment firm of Merrill, Lynch said that the filing of the 1113 and 1114 petitions with the bankruptcy judge could lead to a strike against Delphi's operations by the UAW and other unions. Strikes aimed at Delphi will undermine, GM's shaky finances, Merrill Lynch warned. GM lost $10.6 billion in 2005 and also warned in its 10K filed this week that a strike would have a serious impact on its finances. - Joe Szczesny


GM CEO laments Delphi decision; other makers could be hurt, as well


"We disagree with Delphi's approach but we anticipated that this step might be taken," said General Motors CEO Rick Wagoner, responding to news that Delphi’s own CEO, Steve Miller, would ask the bankruptcy court to void the suppliers labor agreement with the UAW and five other unions. Until a few days ago, it had begun to look like a confrontation might be avoided, in large part due to the help of the giant automaker, which counts Delphi , its former parts subsidiary, as one of its largest suppliers. GM agreed to a multi-billion-dollar buyout of Delphi workers, while also allowing thousands more to transfer back to General Motors plants. But Delphi ’s continued insistence on huge pay cuts soured the deal. The question is when and how badly a union walkout at Delphi would impact GM. Unlike decades past, few assembly lines store large supplies of parts and components any more, so some analysts suggest the automaker might be forced to start closing its own assembly lines within a matter of days. Combined with the many other problems facing GM, observers fear the impact could be devastating. Among other things, it could result in further erosion of GM sales and market share. But the U.S. giant is not alone.


Though GM still makes up the majority of Delphi’s sales, the supplier has been steadily increasing both its non-automotive business, and its list of non-GM customers. Toyota now ranks as one of Delphi’s major sources of revenue, and the supplier is currently one of the three largest sources of parts and components for Toyota’s North American assembly lines, according to company officials. Toyota on Friday issued a statement saying it would continue "working with Delphi through this difficult period." The Japanese automaker, the statement continued, did "not not foresee any production interruption at our North American plants. However, a spokesman acknowledged that this was a tentative and potentially temporary bit of optimism. Should Delphi's unions decide to strike, he admitted, the situation could quickly change. - TCC Team


Delphi plans to shrink dramatically

Delphi will emerge from bankruptcy as a smaller and more profitable company, company officials said Friday. "We are clearly focused on Delphi's future," said Robert 'Steve' Miller as he sketched out a plan for the now-bankrupt company.  "Emergence from the Chapter 11 process in the U.S. requires that we make difficult, yet necessary, decisions. To complete our restructuring process, we must focus on five key areas," added Miller, who said the nullification of the existing labor agreements wit the UAW and GM are only the first two steps in Delphi's transformation.


Miller said Delphi’s plans call for shrinking its product portfolio dramatically to capitalize on patented technology and market strengths. It will also cut its existing salaried work force, which has been downsized several times, by 25 percent.  Miller also said Delphi needs to come up with a workable solution to its current pension situation, which could include stretching out pension payments or developing an alternate solution. "We are mindful of the impact the implementation of this plan will have on some of our stakeholders, including our employees and communities, yet ultimately, these actions will result in a stronger company with future global growth opportunities," he added. - Joe Szczesny

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.



Delphi drama could kick off political firestorm


The latest twist in the Delphi bankruptcy could kick off a firestorm in Washington . A letter, dated Thursday, from 14 Democratic Congressman from across the U.S. has been posted on the United Autoworkers Union website, urging Delphi CEO Robert ‘Steve’ Miller to “bargain in good faith,” and not “use the bankruptcy process as a substitute for collective bargaining." The letter went on to say that the 14 Congressmen "strongly urge Delphi to come to a fair agreement with its employees and their representatives." Among those signing were Michigan Cong. John Dingell, Major Owens of New York , Sherrod Brown and Ted Strickland of Ohio , and Rush Holt of New Jersey . Those heavily-industrialized states would feel significant effects from a strike at Delphi, which would, in turn, have an immediate impact on automakers like General Motors and Toyota , as well as other automotive suppliers. – TCC Team

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