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US: Delphi Asks Bankruptcy Court to Void Union Deals

by Michelle MaynardThe New York Times
March 31st, 2006

Delphi, the nation's biggest auto-parts maker, followed through on a months-old threat today and asked a bankruptcy court judge for permission to throw out its labor agreements and impose sharply lower wages and benefits.

It also said it plans to close or sell most of its plants in the United States, and cut its worldwide salaried staff. Together, the moves will eliminate 28,500 jobs.

In addition, Delphi asked the bankruptcy court to reject some of its contracts with General Motors, its biggest customer, which would allow Delphi to renegotiate the prices G.M. pays for parts. It said it would keep only eight of its American plants.

The move was the first time that a major player in the automobile industry had sought to void its labor contracts, setting the stage for a precedent-setting court ruling later this year.

The actions by Delphi, which filed for Chapter 11 last October, would eliminate 20,000 hourly jobs in the United States, or about 60 percent of its total work force. It will cut another 8,500 salaried jobs worldwide. Delphi has about 34,000 hourly workers in the United States, with the United Automobile Workers representing about 24,000.

G.M., which spun off Delphi in 1999, has played a significant role in three-way discussions with Delphi and the U.A.W.

A hearing on Delphi's request is scheduled to begin May 9. If the request is granted, Delphi would be able to tear up its existing labor contracts and impose new terms. Leaders of Delphi's unions have threatened to strike if that happens, a move that in turn could cripple G.M. and lead to its own bankruptcy filing.

However, a judge's decision is still months off, providing time for an agreement to be reached.

"Emergence from the Chapter 11 process in the U.S. requires that we make difficult, yet necessary, decisions," Delphi's chief executive, Robert S. Miller, said in a statement. "These actions will result in a stronger company with future global growth opportunities."

But the U.A.W. reacted angrily to the Delphi move, calling it "a travesty and a concern for every American."

In a statement, the U.A.W. president, Ron Gettelfinger, and vice president, Richard Shoemaker, continued, "Delphi's proposal goes far beyond cutting wages and benefits for active and retired workers. Delphi's outrageous proposal would slash the company's U.A.W.-represented hourly work force by approximately 75 percent, devastating Delphi workers, their families and their communities."

"In the event the court rejects the U.A.W.-Delphi contract and Delphi imposes the terms of its last proposal, it appears that it will be impossible to avoid a long strike," the statement said.

Meanwhile, G.M., which agreed last fall to restore price cuts it had negotiated with Delphi in order to give its former unit some breathing room in bankruptcy, said it was disappointed by its former unit's bid to reject some of its contracts. That is a common tactic in bankruptcy, as companies try to lower their costs.

"We disagree with Delphi's approach but we anticipated that this step might be taken," G.M.'s chief executive, Rick Wagoner, said in a statement. He added, "G.M. expects Delphi to honor its public commitments to avoid any disruption to G.M. operations."

Under their contract, which is essentially the same as the one covering workers at G.M., members of the U.A.W. are paid $27 an hour in wages, as part of total compensation, including pensions, health care and other benefits, of $78.63 an hour, according to Delphi's bankruptcy filing.

Delphi's original offer to the U.A.W., made shortly after its bankruptcy filing, was for wages as low as $9.50, a move that sparked outrage among union members.

In its court filing, Delphi said it wanted to impose its last offer, made a week ago, which was for a $5 an hour cut in wages to $22 this year, followed by another cut to $16 an hour next year. Workers would be given $50,000 each to ease the impact of the cuts.

But the U.A.W. earlier this week rejected the bid , which local union leaders said workers would undoubtedly vote down.

The offer came a week after Delphi, the U.A.W. and G.M. agreed on a buyout program offered to all 113,000 G.M. workers and 13,000 of Delphi's workers. Under the plan, which would be paid for by G.M., workers could receive up to $140,000 if they agree to leave.

That, however, may be all that the U.A.W. agrees to. Although judges encourage labor unions and companies to reach agreements, rather than have lower rates imposed upon them, union leaders have said they may not continue talking with Delphi.

Labor experts say it would be politically impossible for the U.A.W.'s president, Mr. Gettelfinger, to agree to wage cuts, because that would set a precedent in even more critical talks next year with G.M. and Ford.

Delphi has been included in the union's practice of "pattern bargaining," which essentially calls for the same terms at each company, and cuts granted there would open the door for the automakers to demand lower wages and benefits as well.

Although it has agreed to some modifications, particularly changes in health care coverage negotiated at G.M. and Ford last year, the U.A.W. has not granted pay cuts at a major auto company since it agreed to concessions with Chrysler Corporation in 1978 as part of its bid for a Congressional bailout. Those cuts were later restored, however.



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