Marc
18th February 2006, 07:24 AM
From The Detroit Free Press (http://www.freep.com/apps/pbcs.dll/article?AID=2006602180315)
Delphi Corp. Chief Executive Steve Miller gave the nation's largest auto parts maker six more weeks to negotiate a critical deal to cut jobs, wages and benefits for hourly workers without a bankruptcy court showdown and strike.
Auto-industry experts doubt that can be done by March 30, the new deadline Miller set Friday. They say a deal that involves General Motors Corp., Delphi's largest customer, and the UAW, its largest union, almost certainly must be reached by June.
Delphi is posting losses of $200 million to $1 billion a month, and UAW Vice President Richard Shoemaker -- who has been leading a coalition of the parts maker's six unions -- is set to retire in June at the auto workers' national convention in Las Vegas.
"You certainly wouldn't want to put the burden of this on someone who is new to the scene," David Cole, director of the Center for Automotive Research in Ann Arbor, said Friday, shortly after discussing the situation with Miller.
The uncertainty is creating a lot of anxiety among Delphi's 34,000 blue-collar workers in the United States, people like Tammyann Hartung, a single mother of three who assembles oil coolers at a Lockport, N.Y., plant.
"It's starting to get pretty old living on eggshells, not knowing what's going to happen," said Hartung, who makes $26 an hour and is worried she'll have to sell her house.
Delphi was expected either to have reached an agreement with GM and the UAW, or file a bankruptcy court motion to eliminate all its union contracts and clear the way for it to slash 24,000 jobs and reduce the pay of 10,000 remaining workers by two-thirds.
Delphi chose neither. For the third time, the Troy-based company delayed filing the motion. Now it says it can reach an agreement by March 30. And like it said the three previous times, if no deal is reached, it will file a motion to eliminate union contracts.
Filing the motion would create an onslaught of nationwide plant disruptions that undoubtedly would affect GM, which employs nearly 80,000 Michigan workers and 142,000 people in the United States, and spends $85 billion annually on parts and services from more than 3,000 suppliers.
Because Delphi is GM's largest supplier, and GM supports more than 3,000 other suppliers, a strike at Delphi would indirectly affect the entire automotive industry.
Bankruptcy experts following Delphi's case said they were not surprised by the postponement.
"I bet a lot they would do that," said Jim McTevia, a managing member of McTevia & Associates LLC in Bingham Farms, a turnaround consultancy firm. "As in every basic problem-solving process, the most important ingredient is time. It is with time you are able to reach into the future and get answers to problems."
McTevia has more than 40 years of bankruptcy filings experience. He said even if Delphi fails to reach an agreement by March 30, the court likely would grant another extension.
"A bankruptcy does not solve any business problem. It is an expensive process of buying time," McTevia said. "It is my opinion that the court will grant Delphi as much time as it needs to resolve problems."
Those problems are large. Delphi once was GM's parts-making subsidiary and spun off as an independent company in 1999. But it has never been consistently profitable. It lost $4.8 billion in 2004. After losing another $741 million in the first six months of 2005, it filed for Chapter 11 bankruptcy protection Oct. 8.
The parts maker says it is burdened with restrictive labor contracts that require it to pay far more than its competitors. The company says its 34,000 hourly workers in the United States make $27 an hour -- $76 an hour when benefits are added. It wants to cut 24,000 hourly jobs from the U.S. workforce and reduce the wages to an average $12.50 an hour, or $35 an hour when benefits are added.
Delphi threatened to cancel labor contracts if blue-collar workers don't accept significant reductions in jobs, pay and benefits. The six unions banded together in a coalition led by the UAW and threatened to strike if contracts are nullified -- a walkout that could quickly shut down most, if not all, GM assembly plants in the United States, Mexico and Canada.
But fearing the threat of a UAW strike at Delphi, GM Chairman and Chief Executive Officer Rick Wagoner met with Miller on Nov. 24 to discuss a plan for temporarily forgoing price reductions GM demanded on parts it buys from Delphi.
GM Chief Financial Officer Fritz Henderson said Jan. 26 that the automaker will spend between $3.6 billion and $12 billion in benefit guarantees for some former workers who were moved to Delphi.
Senior credit analyst Brad Rubin of BNP Paribas in New York said a bailout for Delphi is affordable for GM. Rubin estimates that out of 24,000 UAW Delphi workers, two-thirds are close to retirement and can be bought out.
"Now, to pay them off, we estimated at worse to be $1 billion to $1.2 billion," Rubin said.
For the remaining workers, Rubin estimates it would cost GM some $200 million a year to keep Delphi hourly wages up near $22 an hour -- $5 an hour less than the current average, but perhaps enough to avert a strike.
GM, Delphi and the UAW have been negotiating in earnest since Jan. 20, under the belief that avoiding a strike is best for everyone.
About 45,000 of GM's 105,000 hourly workers are eligible to retire over the next few years.
Incentives that would encourage even a fraction of those workers to retire would free up jobs for Delphi workers worried about a bankruptcy court possibly voiding the UAW contract and putting their livelihoods in jeopardy.
Shoemaker has identified at least five GM vehicle assembly plants where job openings are more likely to become available for Delphi workers if the automaker and the union agree on a buyout package, said one UAW local president who attended recent briefings by Shoemaker. The president of the union local declined to be identified for fear of retribution from the union.
Jobs at those five plants -- located in Arlington, Texas; Fairfax, Kan.; Ft. Wayne, Ind.; Wilmington, Del., and Shreveport, La. -- are unlikely to be filled by laid-off GM workers seeking employment at other facilities, the union local president said.
The longer Delphi stays in bankruptcy, however, the more it will cost GM, said Erich Merkle, auto analyst with IRN Inc. in Grand Rapids.
"Someone has to make sure Delphi's parts are not interrupted," Merkle said, adding that the likelihood of parts interruptions increases the longer a company is in bankruptcy.
Said Brett Hoselton, auto analyst with Keybanc Capital Markets: "The longer this thing goes on, you're impacting your employees and customers."
Delphi Corp. Chief Executive Steve Miller gave the nation's largest auto parts maker six more weeks to negotiate a critical deal to cut jobs, wages and benefits for hourly workers without a bankruptcy court showdown and strike.
Auto-industry experts doubt that can be done by March 30, the new deadline Miller set Friday. They say a deal that involves General Motors Corp., Delphi's largest customer, and the UAW, its largest union, almost certainly must be reached by June.
Delphi is posting losses of $200 million to $1 billion a month, and UAW Vice President Richard Shoemaker -- who has been leading a coalition of the parts maker's six unions -- is set to retire in June at the auto workers' national convention in Las Vegas.
"You certainly wouldn't want to put the burden of this on someone who is new to the scene," David Cole, director of the Center for Automotive Research in Ann Arbor, said Friday, shortly after discussing the situation with Miller.
The uncertainty is creating a lot of anxiety among Delphi's 34,000 blue-collar workers in the United States, people like Tammyann Hartung, a single mother of three who assembles oil coolers at a Lockport, N.Y., plant.
"It's starting to get pretty old living on eggshells, not knowing what's going to happen," said Hartung, who makes $26 an hour and is worried she'll have to sell her house.
Delphi was expected either to have reached an agreement with GM and the UAW, or file a bankruptcy court motion to eliminate all its union contracts and clear the way for it to slash 24,000 jobs and reduce the pay of 10,000 remaining workers by two-thirds.
Delphi chose neither. For the third time, the Troy-based company delayed filing the motion. Now it says it can reach an agreement by March 30. And like it said the three previous times, if no deal is reached, it will file a motion to eliminate union contracts.
Filing the motion would create an onslaught of nationwide plant disruptions that undoubtedly would affect GM, which employs nearly 80,000 Michigan workers and 142,000 people in the United States, and spends $85 billion annually on parts and services from more than 3,000 suppliers.
Because Delphi is GM's largest supplier, and GM supports more than 3,000 other suppliers, a strike at Delphi would indirectly affect the entire automotive industry.
Bankruptcy experts following Delphi's case said they were not surprised by the postponement.
"I bet a lot they would do that," said Jim McTevia, a managing member of McTevia & Associates LLC in Bingham Farms, a turnaround consultancy firm. "As in every basic problem-solving process, the most important ingredient is time. It is with time you are able to reach into the future and get answers to problems."
McTevia has more than 40 years of bankruptcy filings experience. He said even if Delphi fails to reach an agreement by March 30, the court likely would grant another extension.
"A bankruptcy does not solve any business problem. It is an expensive process of buying time," McTevia said. "It is my opinion that the court will grant Delphi as much time as it needs to resolve problems."
Those problems are large. Delphi once was GM's parts-making subsidiary and spun off as an independent company in 1999. But it has never been consistently profitable. It lost $4.8 billion in 2004. After losing another $741 million in the first six months of 2005, it filed for Chapter 11 bankruptcy protection Oct. 8.
The parts maker says it is burdened with restrictive labor contracts that require it to pay far more than its competitors. The company says its 34,000 hourly workers in the United States make $27 an hour -- $76 an hour when benefits are added. It wants to cut 24,000 hourly jobs from the U.S. workforce and reduce the wages to an average $12.50 an hour, or $35 an hour when benefits are added.
Delphi threatened to cancel labor contracts if blue-collar workers don't accept significant reductions in jobs, pay and benefits. The six unions banded together in a coalition led by the UAW and threatened to strike if contracts are nullified -- a walkout that could quickly shut down most, if not all, GM assembly plants in the United States, Mexico and Canada.
But fearing the threat of a UAW strike at Delphi, GM Chairman and Chief Executive Officer Rick Wagoner met with Miller on Nov. 24 to discuss a plan for temporarily forgoing price reductions GM demanded on parts it buys from Delphi.
GM Chief Financial Officer Fritz Henderson said Jan. 26 that the automaker will spend between $3.6 billion and $12 billion in benefit guarantees for some former workers who were moved to Delphi.
Senior credit analyst Brad Rubin of BNP Paribas in New York said a bailout for Delphi is affordable for GM. Rubin estimates that out of 24,000 UAW Delphi workers, two-thirds are close to retirement and can be bought out.
"Now, to pay them off, we estimated at worse to be $1 billion to $1.2 billion," Rubin said.
For the remaining workers, Rubin estimates it would cost GM some $200 million a year to keep Delphi hourly wages up near $22 an hour -- $5 an hour less than the current average, but perhaps enough to avert a strike.
GM, Delphi and the UAW have been negotiating in earnest since Jan. 20, under the belief that avoiding a strike is best for everyone.
About 45,000 of GM's 105,000 hourly workers are eligible to retire over the next few years.
Incentives that would encourage even a fraction of those workers to retire would free up jobs for Delphi workers worried about a bankruptcy court possibly voiding the UAW contract and putting their livelihoods in jeopardy.
Shoemaker has identified at least five GM vehicle assembly plants where job openings are more likely to become available for Delphi workers if the automaker and the union agree on a buyout package, said one UAW local president who attended recent briefings by Shoemaker. The president of the union local declined to be identified for fear of retribution from the union.
Jobs at those five plants -- located in Arlington, Texas; Fairfax, Kan.; Ft. Wayne, Ind.; Wilmington, Del., and Shreveport, La. -- are unlikely to be filled by laid-off GM workers seeking employment at other facilities, the union local president said.
The longer Delphi stays in bankruptcy, however, the more it will cost GM, said Erich Merkle, auto analyst with IRN Inc. in Grand Rapids.
"Someone has to make sure Delphi's parts are not interrupted," Merkle said, adding that the likelihood of parts interruptions increases the longer a company is in bankruptcy.
Said Brett Hoselton, auto analyst with Keybanc Capital Markets: "The longer this thing goes on, you're impacting your employees and customers."
