Tuesday, August 30, 2005

UAW says Delphi asks too much

Supplier's demands, which total $2.5 billion, will cut cost-of-living raises, allow factory closures.

By Brett Clanton / The Detroit News

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As more details emerge of Delphi Corp.'s demands for concessions from the United Auto Workers, union officials at the auto supplier's plants are digging in for a fight.

In addition to demands for wage and benefit cuts and work rule changes first reported Sunday in The Detroit News, Delphi wants the right to close or sell any factory at any time, eliminate cost-of-living raises and other givebacks, according to an Aug. 26 letter to workers from Howard Green, shop chairman of UAW Local 2195 in Athens, Ala.

They are cuts the union "simply could not meet," Green said in the letter, one of several sent by local plant union leaders to their members. The letters summarized details of a meeting in Chicago last week where national UAW leaders updated local officials on talks between the union and Delphi.

The demands, which collectively total about $2.5 billion, shed light on the negotiations under way between Delphi and the union and highlight the depth of the troubles facing the world's largest auto parts maker.

Troy-based Delphi is threatening to file bankruptcy before new laws go into effect next month if it cannot work out a deal to cut costs with the union and former parent General Motors Corp.

The UAW has said it will not reopen its labor contract with Delphi before it expires in 2007, but the supplier's demands put the union in a difficult position. The UAW risks losing credibility with its members if it capitulates, but could face bigger risks if Delphi files for bankruptcy.

If Delphi sought Chapter 11 protection, a new contract would be negotiated between the union and Delphi, according to the letter from Green.

At the meeting, UAW Vice President Richard Shoemaker told union officials from Delphi plants that "everything would be turned over to a bankruptcy judge" if an agreement could not be reached and that "the judge would more than likely tell Delphi to install their final offer as the new contract," Green's letter said. "Should this happen, the UAW's only alternative would be to accept the offer or strike."

Shoemaker also told Delphi union leaders that the supplier had given the UAW a letter with a list of items it needed to make the company viable.

Included on the list were:

• Competitive wage and benefit agreements to replace those set in the union's 2003 labor contract with GM. Under that agreement, most Delphi workers earn about $27 per hour in wages and benefits, the same as GM workers and higher than the roughly $15 per hour paid by most suppliers.

• Elimination of a jobs bank that keeps 4,000 workers on the payroll even when the company has no work for them.

• The right to offer buyouts or buy downs to employees

Delphi, spun off from GM in 1999, has posted four consecutive unprofitable quarters in the face of production cutbacks at Detroit automakers, rising raw material costs and pricing pressures.

In July, the company hired turnaround specialist Robert S. "Steve" Miller as chairman and CEO. Miller says Delphi needs relief from the UAW from rising wage and benefit costs, which he claims equal $130,000 per worker each year -- a figure the union disputes.

"We simply cannot compete and cannot survive long-term unless we reduce our costs" under existing labor agreements, Miller said on Aug. 8 in a conference call to report second quarter earnings.

Martin King, analyst with Standard & Poor's, made a similar point in a Monday report on Delphi.

"The ability of Delphi to restructure its businesses is limited by its UAW agreements, which prohibit layoffs and divestitures."

But the UAW said it already gave Delphi relief last year in the form of a so-called "two-tier" wage agreement. Under the pact, all incoming workers earn roughly half the wages and benefits paid to existing workers.

"It looks like things are going to get rough," said UAW Local 909 President Al Benchich in a letter to workers at a GM transmission plant in Warren, Bloomberg News reported Monday.