GM, Delphi Near Labor Deal

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WSJ.com - GM, Delphi Near Labor Deal* This article will be available to non-subscribers of the Online Journal until June 14, 2006.

GM, Delphi Near Labor Deal
Thousands of Workers Could Get Up to $140,000 to Leave
By JEFFREY MCCRACKEN
June 8, 2006


Talks between General Motors Corp., auto supplier Delphi Corp. and their unions to restructure Delphi's blue-collar work force outside bankruptcy court have made substantial progress in the past week, according to people familiar with the talks.

A deal soon could be reached to offer thousands of Delphi workers lump-sum payments of $70,000 to $140,000 to leave the company and their health-care benefits behind, according to three of those people. Delphi and former parent GM are also close to offering Delphi's five smaller unions early-retirement packages similar to the $35,000 packages offered the United Auto Workers union in March, say those people. These lump-sum buyouts and early-retirement offers could be announced as early as next week.

In addition, Delphi wants to offer early-retirement buyouts to a further 4,500 non-UAW hourly workers, according to a Delphi court filing.
However, a final comprehensive deal to shrink Delphi's work force and lower its labor costs isn't imminent and won't be announced before the UAW kicks off its convention next week in Las Vegas, say those people. A full deal could be done by September once the final buyout and early-retirement numbers are clear.

Delphi and GM have also made "substantial progress" on the 21 of 29 U.S. plants Delphi wants to eliminate, these people said. That process entails GM working with Delphi to close about 10 plants and sell the rest. GM must find new suppliers in cases where plants will close while it finds potential buyers for plants that will stay open, say people familiar with the talks.
If the buyouts, early-retirement offers and Delphi plant sales go as expected, and 5,000 Delphi workers flow back to GM as planned, Delphi could be left with just 6,000 to 7,000 hourly workers when it exits bankruptcy, say people close to the talks. That smaller hourly base would make it easier to reach an agreement on wages for remaining hourly workers, especially with GM covering most of the postemployment benefits of those who take the buyouts.

A resolution that results in a so-called soft landing for most Delphi workers could greatly reduce the chances that unions would feel compelled to call a strike to protect their contracts. Some Wall Street analysts have worried that a Delphi strike would derail GM's efforts to recover from last year's $10.6 billion loss.

One issue still being discussed is GM's role and timing in covering wages for the remaining Delphi hourly workers, who are poised to see their hourly wages fall to $16.50 from about $27 an hour, a plan that would require financial support from GM, Delphi's former parent. Without a contribution from the auto maker, Delphi has said it will be able to pay hourly employees only $12.50 an hour.

The UAW is seeking to keep workers closer to the $27 hourly wage through the end of current labor contract that expires in September 2007, according to UAW officials familiar with the talks.

The lack of a final deal is noteworthy because the convention will mark the retirement of Richard Shoemaker, the UAW's lead negotiator on GM-Delphi talks. Mr. Shoemaker, who has headed up the UAW's GM department since 1995, is seen as a key negotiator by union and company officials. The successor also will have to negotiate a new deal with GM when its contract with the UAW expires next year. The UAW didn't make Mr. Shoemaker available to comment.

Most of the UAW's top elected officers are either retiring or up for re-election at next week's convention. UAW President Ron Gettelfinger is expected to be re-elected by the roughly 1,200 union delegates. The convention is held every four years to elect officers and vote on proposed constitutional changes and public policy positions.

UAW insiders had as of late May hoped to get a comprehensive Delphi deal done before Mr. Shoemaker retired and left the negotiation to his likely successor. Mr. Shoemaker's last day will be June 15. The election to replace Mr. Shoemaker, and other retiring UAW leaders, is held June 14.
"I'd like to get a consensual deal done before he leaves, but I don't know if it's realistic or not. There's no question that ****************'s grasp on the national union contract and the larger issues will be tough to replace," said Gary Cowger, GM's group vice president of labor relations who has worked with Mr. Shoemaker since 1999 on UAW contract talks. Delphi, GM and Delphi's unions have negotiated since late last year on an out-of-court deal to lower wages and benefits.

"All of our senior management has a great deal of respect for his ability to understand these complex situations and get to solutions on these really big problems," said Mr. Cowger. "Our opinions don't necessarily agree, but he is plain spoken and direct to us."

UAW spokesman Paul Krell declined to comment on talks. Spokesmen at Delphi and GM also declined to comment.

The UAW is by far the largest union at Delphi, representing about 24,000 of Delphi's 33,000 union workers. Delphi has about 9,000 workers with five other unions, such as the United Steelworkers or the IUE-CWA.

In March, Delphi offered early-retirement packages of $35,000 to about 18,000 of its UAW workers with 30 years or more experience. So far about 8,000 workers accepted the offer in which they would retire and keep their full retiree benefits, according to UAW officials. GM has gotten about 21,000 workers to accept an early-retirement or lump-sum buyout, according to people familiar with the matter.

Delphi, GM and the UAW are close to a deal to offer $70,000 and $140,000 lump-sum buyouts to lower seniority Delphi workers. Workers with less than 10 years at Delphi would receive the $70,000 while keeping their accrued pension but leaving behind their health-care benefits. Workers with more than 10 years would get $140,000.

The lump-sum and early-retirement buyout payments would be paid for by GM, which has estimated its obligation to Delphi at $5.5 billion to $12 billion. Delphi was spun off from the auto maker in 1999.

Citing progress in labor talks, Delphi on Monday asked the U.S. Bankruptcy Court in New York to delay hearings this week on whether Delphi can break its union contracts.

"We thought it was better for us to be at the bargaining table rather than in the courtroom," Delphi's lawyer, Jack Butler, said Monday. "Bargaining is taking place today that would not have taken place if we were in court."

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This may be part of the reason for the stock price climbing lately. The Street probably thinks that a deal with the UAW on Delphi is getting more likely, and a crippling strike is less likely.

I was glad to see this news tonight.