Delphi proposes brutal cuts to UAW

[desmo9]

Thursday, October 6, 2005


Delphi proposes brutal cuts to UAW


By Bill Vlasic / The Detroit News


Delphi Corp. has demanded that its 24,000 UAW workers accept unprecedented cuts in wages and benefits as part of a last-ditch effort to keep the giant auto-parts maker from going bankrupt, according to a UAW memo obtained by The Detroit News.

The bombshell proposal came as union officials and others close to the situation say that General Motors Corp. has broken off its own negotiations with Delphi on a financial bailout.

An "update" to UAW members from the union's International Bargaining Team on Thursday said Delphi could file for Chapter 11 bankruptcy as soon as today.

"It is clear that in one form or another, there is a restructuring of Delphi forthcoming and it will have a dramatic impact on UAW members," the memo said.

Delphi's final demands to the union are far beyond anything ever asked from the UAW - wages slashed 60 percent to as low as $10 an hour, elimination of the jobs bank for laid-off workers, and the right to close or sell more than 20 plants over the next three years.

But even those dramatic measures wouldn't keep Delphi out of bankruptcy in the absence of financial aid from GM., according to the union.

"Delphi representatives have clearly stated that regardless of what the UAW agrees to, GM must provide billions of dollars in financial support or Delphi will be forced to file Chapter 11," the memo said. "GM has not agreed to do so at this time."

Without a deal from the UAW and GM, Delphi Chairman Robert "Steve" Miller has said he will file for bankruptcy before a revision to the federal law takes effect Oct. 17.

It would be the largest industrial bankruptcy in U.S. history, and the impact would be felt from GM, Delphi's biggest customer, to the hundreds of its suppliers and the communities that rely on Delphi business.

There was no official comment Thursday from Delphi, the UAW or GM as the clock ticks down on a possible Chapter 11 filing. On Wall Street, analysts and investors were increasingly skeptical that an 11-th-hour deal was at hand.

"It's becoming clearer in our view that a deal is less and less likely," said Brad Rubin, an analyst with BNP Paribas in New York.

Miller, a veteran of bankruptcies at auto supplier Federal-Mogul Corp. and Bethlehem Steel, has been unavailable for comment since telling The News on Sept. 27 that Delphi cannot operate any longer with UAW-level wages and benefits.



remainder of article here, including a copy of UAW propaganda:


http://www.detnews.com/2005/autosins.../01-339998.htm

[desmo9]

Many auto suppliers, even some of Delphi's non-UAW plants, have operated under the conditions stated in the article, and the workers do indeed have the means to put food on the table and buy a car. In the realm of what you can get right out of high school or with a GED these days, $10-$12 with vacation and benefits is pretty good.

The UAW's hayday, and the offshoring that's come with it, is about over.

[mgescuro]

I love this from the Wall Street Journal...

But some analysts have zeroed in on the 1999 spinoff agreement between GM and Delphi. An indemnity clause in that agreement gives GM a general, unsecured claim on Delphi's assets in bankruptcy proceedings much like what a bondholder might have. As a result, analysts and lawyers said GM could be in a position of owning a sizable chunk of restructured, cleaned-up Delphi common stock -- essentially giving GM a way to earn back any money it spends paying retiree health care or topping up worker pensions, as it might be called upon to do should Delphi terminate its pension plan.

GM would have a similar claim on Delphi assets out of bankruptcy, but Delphi is probably more attractive to own postbankruptcy once it sheds unprofitable businesses and onerous labor pacts.

"If you are going to own a piece of Delphi, you'd rather that was a right-sized, cleaned-up one, right? GM would come out the other end of the bankruptcy process owning a substantial chunk of debt and likely the common stock would go to creditors like GM," said Robert Keach, a Maine bankruptcy lawyer and board member for the American Bankruptcy Institute.

Another benefit, said Mr. Keach, is "bankruptcy would create certainty for GM" because it would know the exact amount of its liability, as opposed to this "open-ended contingent liability they have now."

http://online.wsj.com/article/SB1128..._whats_news_us

[desmo9]

I can't help but wonder if the UAW will strike GM if the bottom falls out from under its Delphi members.

Something doesn't add up, because yesterday the press stated that GM and the UAW had agreed to healthcare provisions that would save GM $1 billion a year. They never opened the contract or got very lean, but as stingy as the UAW is, even this level of agreement suggests a lack of animosity.

And make no mistake, something like 70% of GM's components are sourced to Delphi. If Delphi stops, GM stops, regardless of what GM UAW members do. So there's more to the story.

[jbernie]

I won't claim to have followed this story closely other than seeing some articles on here, but GM may have played a very good hand by breaking of negotiations with Delphi. At this point there is no known "saviour" to Delphi that will be willing to foot the bill.

There for the UAW if it doesn't pull back automatically puts Delphi in bankruptcy, which i assume means Delphi can restructure and cancel the contracts and kill the UAWs power. GM's interest will be once Delphi fails, and goes to non union labor, its major supplier won't be as likely to strike (they are on much lower pay) and if/when it needs to restructure itself, it can at least be assured of parts being supplied.

No company should express interest in Delphi for now, so that way they can get it cheap after the company gets rid of a good portion of its excess labor costs.

I won't say which side is right, and i don't enjoy seeing people loose their jobs, but if this should happen (Delphi goes under) it will potentially change the negotiating power of the car companies when they get down to serious business.

James

[mjd1001]

I wonder how much this can/will escalate.

If Delphi were to accept GM's proposal, how long before other suppliers in the auto industry are presented with this deal or one similar to it? Also, would Delphi accepting this deal have any impact on negotiations between the UAW and GM for their major contract in 2 years with factory workers?

If Delphi goes into bankruptcy, the contracts will be voided and low wage labor can be hired. How far would Delphi/GM push this. Would it be seen as a legitimate attempt to break the union and would the UAW respond by striking at assembly plants? If that were to happen, what would GMs responce be?

This has the potential to be something interesting to watch.

[Caddy Fan]

Could this have anything to do with GM selling off it's portion of Subaru? To create money for this situation?

[Motownr]

What we're seeing is a system that works.

Bankruptcy is the tool in a free enterprise society that carves cancer out of living companies. Delphi, laden as it is with outdated labor relations, is a dead man walking. Post Chapter 11, it has a chance to employ an awful lot of people and provide a return to its investors.

Compared to the wrenching changes in the steel industry, this isn't all that big a deal. However, it's history in the making for all of us tied to the car business.

What an interesting few weeks it's going to be.

[56 Starchief]

feel the burn UAW--feel it like pepper spray--if u dont get smart u will cease to exist.

[mjd1001]

Just for the record, I am not openly rooting for the UAW to go down in flames and for hardship and pain to be inflicted upon it's members.

I just think some severe changes must be made, some of those changes to the extent that UAW members themselves would beleive them to be so severe to cause them pain.

In my view, a Union should ensure working conditions are safe, and that workers receive appropriate wage and benefit levels for their line of work. This must be done in conjuction with the company to make sure that not only do union members be compensated appropriatly, but that the company is strong enough to not cause job cutbacks.

The problem now is that, compared to many other industries, the typical UAW factory worker is vastly overpaid both in wages and beneifits. The UAW worker may not think they are overpaid, but you have to look at what kind of jobs those workers would be able to get if they had to leave their current job.

It's all about imbalances between industries right now with the UAW and Auto workers. For the UAW and GM to both work, we simply can't hear any more stories about the UAW janitor making over $80,000 a year, or when a factory gets closed the UAW worker getting 90% of their pay to stay home and not work at all. It can't happen in the economy we have now.

[01cavalier]

So, it wont be long before they file for bankruptcy, this would be a good thing I think. They really need to restructure, and I really doubt the UAW will take the contract. Theyve done enough harm as it is & they need to go. Now, get GM to do the same....then we may see some real progress!

[4gm]

Here's a thought: maybe if the UAW were paid real world wages and benefits, Detroit's automakers and suppliers might have been able to keep a few more factories open here in the States. Less people could have lost their jobs. It's a moot point now. I just wanted to make it.

[goblue]

You know, GM could say to the UAW at large, reopen the contracts now, or we won't bail out Delphi. BTW, striking a bankrupt company is illeigal - which means the workers can be fired, losing all benefits current and future. Then the would be rehired under lower wages and benefits. Its how you break a union. Northwest opened the door - and everybody noticed there was zero backlash against NWA.

[Jhoff]

For too long now it would seem that the UAW has demaned more than it was due from the autonakers and their affiliates. Now, it would seem that the parasite is about to kill it's host. Had the UAW simply demaded resonably pay for their members this most likley could have been avoided. It is beyond me how they can justify an $87,000 salary for a janitor, a job which requires a high school level education.
As an education major, when I graduate in two years with a B.S & M.S. i can look foward to a salary of 50-52 thousand. In order to reach 87,000 a year I would have to work twenty years and earn about 30-60 garduate level credits above my masters degree. Now tell me why a janitor should earn the same as someone who has done all that.

[jckjds]

Just to be clear, filing bankruptcy does not guarantee that the burden of the collective bargaining agreement ("CBA" or union contract) can be cast aside. First, the company and the union must meet and make a good faith effort to come to a resolution (i.e. renegotiate). If they are unable to reach an agreement, then the company can approach the bankruptcy court and seek permission to terminate portions of the CBA (those portions that are reasonable necessary for the survival of the company) and impose it's own conditions. The Court must then find that the proposed changes are equitable (fair) to both parties, taking into account all of the facts and circumstances.

It seems likely that Delphi can meet these requirements with respect to pay, benefits, and workforce size. I would expect Delphi to propose something to the bankruptcy court similar to what has been reported here.