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The Honolulu Advertiser
Posted on: Saturday, April 1, 2006

Delphi proposes 8,500 job cuts

By Dee-Ann Durbin
Associated Press

DETROIT Auto parts supplier Delphi Corp. unveiled a broad restructuring plan yesterday that would cut 8,500 salaried jobs and shut or sell a third of its plants worldwide. The plan asks a bankruptcy court judge to void Delphi's labor agreements in a move that sent a shudder through the auto industry.

The United Auto Workers warned "it will be impossible to avoid a long strike" if the judge agrees to void the contracts and Delphi imposes its most recent wage proposal. A strike could put General Motors Corp., Delphi's former parent and largest customer, perilously close to bankruptcy and hurt other automakers and smaller suppliers as well.

GM and Delphi have deep ties. GM accounted for just under half of Delphi's $26.9 billion in revenues last year, and is required to pay some of Delphi's pension obligations if Delphi is in bankruptcy. The world's largest automaker already is struggling with declining U.S. market share and spiraling costs and is being restructured. In a recent note to investors, Merrill Lynch analyst John Murphy estimated a Delphi strike could cost GM up to $130 million per day.

"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."

GM said it will continue negotiating with Delphi and its unions on a wage agreement. But the UAW, which represents 24,000 of Delphi's 33,000 U.S. hourly workers, said the company's move could stall talks.

"Indeed, today it appears there is no basis for continuing discussions," the UAW said in a statement.

"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."

Troy, Mich.-based Delphi filed for bankruptcy in October. The company said it intends to emerge from bankruptcy during the first half of 2007. To meet that goal, it plans to exit certain product lines and sell or close one third of its non-core plants globally by 2008, including 21 of its 29 U.S. plants.

But unions could stand in its way. The International Union of Electronic Workers-Communications Workers of America, which represents 8,000 Delphi hourly workers, has already voted to strike if the contracts are thrown out, and the UAW could do the same.

Delphi's motion to void its labor contracts was widely expected. The company says it was saddled with uncompetitive labor agreements when it was spun off from GM in 1999. In its court filing, it says it pays workers $78.63 per hour in wages and benefits, or more than three times more than the average auto supplier.

Delphi, GM and its unions spent months negotiating but were unable to reach a wage agreement.

Under its most recent proposal, which was rejected by the UAW and other unions, Delphi proposed dropping pay for current hourly workers to $22 per hour from $27 per hour through September 2007, then to $16.50 an hour.

Delphi also plans to cut 25 percent of its global salaried work force, or around 8,500 workers, including up to 40 percent of its corporate officers. Delphi said that measure should save $450 million per year.