Delphi asks judge to cancel union deals

Judge Robert Drain has scheduled a hearing on Delphi’s request for May 9-10 and won’t decide whether to void Delphi’s contracts until after that hearing. If Drain allows Delphi to void its contracts, Delphi would still have to take the step of throwing them out before the unions could strike, although the company already faces the threat of unauthorized strikes and worker slowdowns.

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.

The company has identified eight U.S. plants that are considered critical to its U.S. operations. They are located in Brookhaven, Miss; Clinton, Miss.; Grand Rapids, Mich.; Kokomo, Ind.; Lockport, N.Y.; Rochester, N.Y.; Warren, Ohio; and Vandalia, Ohio. Delphi said those plants will focus on profitable parts such as safety features, electronics, diesel and gas powertrains and climate control products.

Twenty-one other plants that do not make core products — including those that make brakes and chassis, instrument panels, door modules and steering components — will be sold or closed. That includes plants in Milwaukee; Dayton, Ohio; Kettering, Ohio; Anderson, Ind.; Laurel, Miss.; Athens, Ala.; Flint, Adrian and Saginaw.

“We believe many of these product lines have the potential to compete successfully under new ownership that has the resources and capital to invest in them,” Delphi President and Chief Operating Officer Rodney O’Neal said in a statement.

Delphi also is asking the court to reject unprofitable contracts with GM. The initial motion covers around half of Delphi’s annual volume with GM. Delphi said the judge is expected to consider the motion on May 12, which gives both companies time to continue negotiating prices.

“We simply cannot continue to sell products at a loss,” Miller said.

Delphi also said it will freeze pension benefits for hourly workers on Oct. 1 and for salaried workers on Jan. 1 and will replace them with plans that require employee contributions with company matches. Workers will still have access to any accrued benefits.

The company may ask for relief from the Pension Benefit Guaranty Corp., the Internal Revenue Service and possibly Congress so that when it emerges from bankruptcy protection it won’t immediately owe billions of dollars to its underfunded pension plan. The company expects it will take at least six years to fully fund its plan.

Despite unions’ fury at Delphi’s wage proposals, Delphi said it is encouraged by its progress in negotiations so far and hopes to reach an agreement outside of court. GM’s cooperation is key, since Delphi would depend on GM to supplement its wage offer or provide benefits. For example, in Delphi’s latest proposal, GM would have paid a one-time bonus of $50,000 to each worker, and without GM’s assistance, wages would fall to $12.50 an hour. GM has said a Delphi settlement could cost it between $5.5 billion and $12 billion.

Delphi, GM and the UAW did agree last week to a buyout offer for approximately 17,000 U.S. hourly workers. Under that agreement, workers will be eligible for a lump sum payment of $35,000 to retire. Also, up to 5,000 Delphi workers will be eligible to return to GM.

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