Delphi Asks Court to Toss Contracts

April 1, 2006





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Delphi Corp. on Friday outlined a broad plan for restructuring into a smaller, more nimble company, as it sheds much of legacy operations and labor contracts that it inherited from General Motors.

The plan was laid out by Delphi CEO Robert “Steve” Miller last week, as Delphi petitioned its federal bankruptcy judge to cancel the company’s contracts with the UAW and other unions, and called for closing or selling off 21 of 29 manufacturing sites in the U.S.

In doing so Delphi is running the risk of serious confrontation with key unions and also with GM, which for the first time questioned publicly the course and strategy plotted by Miller and Delphi’s board of directors.

The United Auto Workers ripped the company’s actions in uncompromising terms.

“Delphi’s misuse of the bankruptcy procedure to circumvent the collective bargaining process and slash jobs and wages and drastically reduce healthcare, retirement, and other hard-won benefits or eliminate them altogether is a travesty and a concern for every American,” said UAW president Ron Gettelfinger in a blistering statement denouncing the plan.

“Actions like this just bring us one step closer to confrontation,” said Henry Reichard, who represents plants in Ohio and other states for the International Union of Electronic Workers-Communications Workers of America, which covers 8000 Delphi hourly workers.


Rhetoric aside, however, the UAW also has effectively broken off communication with Delphi. In addition, in another 60 days Richard Shoemaker, the UAW vice president in charge of discussion with Delphi, is set to retire. GM’s labor experts had warned Miller that he would be better off dealing with Shoemaker than his successor.

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

Delphi also asked the bankruptcy judge to void what it described as unprofitable contracts. Some $5 billion of contracts with GM are no longer profitable, according to Delphi.

As part of its transformation in a smaller, leaner, more technologically focused company, Delphi is preparing to eliminate 25 percent of its 8500 salaried jobs, cut 40 percent of its senior executive positions, and overhaul compensation for salaried employees as it reorganizes its electronics business.

Particularly hard-hit by the transformation plan was Dayton, Ohio, where Delphi had maintained a half-dozen manufacturing sites. Four of the five plants could close and 6000 jobs could be eliminated in the city that was once home to “Boss” Kettering, the fabled inventor who was at the heart of General Motors component-making operation.

Rodney O’Neal, Delphi’s chief operating officer, said the new round of cuts is expected to save Delphi $450 million per year on top of the savings realized from competitive measures planned for its core businesses and the disposition of assets that are no longer deemed essential to the company.

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