Thursday, October 13, 2005

Delphi defends big pay cuts

Chairman will 'do what it takes' to restructure, expects UAW to agree to reductions before contract is voided.

By Bill Vlasic and Brett Clanton / The Detroit News

In his words More excerpts of Delphi Corp. CEO Robert S. "Steve" Miller's comments Wednesday:   On fairness to workers: "Philosphers can speculate about fairness. I have to deal with reality."   On plant closings: "The more progress we can make reducing the costs of our labor contracts, the more likely we can salvage some of the facilities that are very much at risk."   On Delphi suppliers: "If we have contracts with those suppliers, they cannot stop shipments to us without incurring the wrath of the law. Once we've explained that to these suppliers, we find that they start shipping."   On GM's future "If nothing changes in the nature of the General Motors labor contracts, there is a serious risk that they would end up at some point in a Chapter 11 filing. I do not think that is imminent. I do not think it is likely."   On the future of worker pensions at Delphi: "The only way we're going to restore the pension plan is to have profits in the restructured company. If the labor costs stay too high, there won't be profits and therefore the pension will get terminated." Latest developments • After winning a U.S. antitrust clearance to raise his ownership stake in General Motors Corp., investor Kirk Kerkorian bought more shares of the company. Kerkorian, who wants a seat on the company's board of directors, now owns 9.9 percent of GM according to a filing Wednesday to the Security Exchanges Commission. The average purchase price was $26.98, totaling $56 million for the 2.1 million shares. • David Tepper, the hedge-fund manager who has made bets on distressed companies including Kmart Corp. and Conseco Inc., bought a 9.3 percent stake in Delphi Corp. Tepper's Appaloosa Management LP bought 52 million shares of Delphi, according to an Oct. 11 filing with the SEC. Delphi's stock rose 17 cents, or 55 percent, to 44 cents Wednesday in New York Stock Exchange composite trading. • Delphi CEO Robert S. "Steve" Miller said Wednesday that the company's U.S. hourly workers may see pay and benefit cuts as early as spring. What's next The next important court action is scheduled for Monday, when hundreds of Delphi's unsecured creditors will meet in New York to form a committee to represent their interests in the case. Error processing SSI file Comment on this story Send this story to a friend Get Home Delivery

TROY -- Delphi Corp. Chairman Robert S. "Steve" Miller made a fiery defense Wednesday of his decision to take the auto-parts giant into bankruptcy and warned the company's 33,000 union workers to expect huge pay cuts by early next year.

Granholm

Gettelfinger

In a tense press conference, Miller acknowledged for the first time the angry reaction from the United Auto Workers and other unions to his demands of 60 percent wage cuts at dozens of factories across the United States.

But the 63-year-old Miller bluntly repeated that he expected the UAW to agree to dramatic reductions in wages and benefits by mid-December, or he may ask the U.S. Bankruptcy Court to reject the current union contracts.

"Paying $65 an hour for someone mowing the lawn at one of our plants is just not going to cut it anywhere in industrial America for very long," Miller said, referring to the average combined wages, benefits and pensions of an hourly Delphi worker.

He also lashed out at a wave of criticism -- led by UAW President Ron Gettelfinger and Gov. Jennifer Granholm -- of Delphi's move to sweeten executive severance agreements just before Saturday's bankruptcy filing.

"Some people insist that fairness requires that we slash wages across the board," Miller said. "Well, I'm sorry. ... There are large disparities in this country and around the world in what people can expect for mowing a lawn versus managing a huge business."

Miller said he believed Granholm "did not fully understand" that the severance deals were necessary to prevent executives and top managers from quitting for other jobs.

"We are in a market for human capital," he said. "If you pay too much for a particular class of employee, you go broke. You pay too little, and you won't have anyone left to do the work."

Granholm spokeswoman Liz Boyd said Wednesday that the "governor stands behind her comments. I think the governor was very clear."

Miller also defended his $3 million signing bonus to join Delphi, "to replace all the other stream of income I was asked to give up." He said he expected to take a cut in his $1.5 million annual salary as part of the restructuring.

With extraordinary candor for a Fortune 500 chief executive, Miller said he did not fear a potential strike by the UAW because it would only make the restructuring of Delphi's U.S. operations harsher.

"I believe the United Auto Workers has competent, adult, honest leadership," he said. "Absolutely nothing can be gained from a strike at any Delphi facility other than to hasten and expand the number of plants that might have to be closed."

There was no immediate comment from the UAW on Miller's remarks.

"We're going to do everything we possibly can to protect the interests of UAW Delphi workers and their families," UAW spokesman Paul Krell said in a statement.

A Delphi worker in Kettering, Ohio, said workers are well aware of their options if the court imposes major wage cuts.

"I think a strike would be a last resort," said Gene Collins, a 57-year-old skilled tradesman. "But if they bring anything back where the wages are cut, we're going to tell them to shove it."

Delphi has 44 manufacturing plants in the United States, where hourly workers earn from $25 to 30 an hour, plus health care and pensions, to produce a wide range of parts for General Motors Corp., its largest customer, and other automakers.

Delphi employs 50,000 people in the United States and 185,000 workers worldwide, with 65,000 employees in Mexico.

None of Delphi's non-U.S. operations is included in the Chapter 11 filing, which ranks as the largest industrial bankruptcy in American history.

While Miller spoke glowingly of Delphi's post-bankruptcy future as a global power in automotive technology, he said lower-tech hardware and parts will be made by workers in Asia and elsewhere.

"(Parts) where there is a thousand of them in a box ... those things will come from China and India," he said.

A veteran of bankruptcies at the Southfield auto supplier Federal Mogul Corp. and Bethlehem Steel, Miller said he was eager to begin negotiations with the UAW and other unions.

He said he expects to make an initial proposal by next week, but gave no indication he has changed his earlier demands for wages as low as $10-12 an hour.

"Today, we are paying double, triple more for hourly labor compared to what prevails in the marketplace," Miller said. "No business can survive doing that."

U.S. Bankruptcy Judge Robert Drain on Tuesday gave Delphi and its unions until mid-December to negotiate labor contracts. If they fail to reach a deal, Miller can ask the court to reject the current pacts and impose employment agreements.

On Monday, a UAW newsletter circulating in Lockport, N.Y., suggested that members should "prepare for (the) possibility" of a strike if talks break down.

Miller said he believes he can get a deal at the bargaining table with the UAW and the International Electrical Workers union.

"Nobody may like it in the end, but in the end they will do it, and they will do it the right way," he said.

The bespectacled Miller grew testy when he described the news coverage of the severance packages, but seemed affected personally by the stinging remarks of Gettelfinger and the UAW rank-and-file.

"They pursued the American dream, and globalization has swept over them," he said. "They are extremely angry, and they look at me. I understand it, and I forgive it."

But Miller said he is speaking "basic truths" about the impact of globalization on the wages and living standards of American autoworkers.

"Well, people don't want to hear it," he said.

"But I'm going to do what it takes to lead a restructuring of this company and perhaps this industry, or I wouldn't have bothered to show up."

You can reach Bill Vlasic at (313) 222-2152 or bvlasic@detnews.com.