Delphi Proposal Cuts Wages, Reduces Health Benefits (Update2)
Oct. 26 (Bloomberg) -- Delphi Corp., the largest U.S. auto parts supplier, wants to cut workers' wages by as much two-thirds, begin monthly charges for health care and eliminate health benefits for retirees as part of a plan to exit bankruptcy.
Delphi workers would earn as little as $9.50 an hour under the company's contract offer. The proposals -- which reduce pay, vacation days, health coverage, pensions and other benefits --were presented to the United Auto Workers union on Oct. 21 in a 36-page letter obtained by Bloomberg News.
Delphi Chief Executive Steve Miller took the Troy, Michigan- based auto-parts supplier's U.S. operations into bankruptcy on Oct. 8 after failing to win concessions from the union and help from General Motors Corp., its former parent and largest customer. Miller has repeatedly said Delphi's wages and benefits can't be sustained. Union leaders have accused the company of trying to dismantle the American middle class.
``It's up to the UAW to make a counteroffer,'' said Sean McAlinden, a labor analyst at the Center for Automotive Research in Ann Arbor, Michigan. ``Miller wants to see how far they're willing to go.''
Delphi wants to charge its active workers up to $656 per month per family for health care; such workers don't pay anything for health insurance now. The company wants to scrap health care for workers who've retired, eliminate cost-of-living adjustments that protect wages against inflation, drop coverage for dental and vision care, and reduce holidays and vacations, according to the letter.
The company also proposes to freeze accumulated years of service toward its pension plan. Delphi may terminate the pension plan entirely if the UAW fails to provide concessions in other areas, the letter said.
$27.50 an Hour
High-seniority workers who build auto parts for Delphi now make $27.50 an hour in wages. The UAW represents about 25,000 Delphi employees in the U.S.
The proposed contract would expire in 2012. Delphi would accept more limited union concessions if GM agrees to provide financial support, the letter said. Delphi lost $4.8 billion in 2004 and has posted losses in three of its six years as an independent company and in the past four consecutive quarters.
``GM may have to enter this situation and take a good chunk of Delphi back,'' McAlinden said.
Delphi has asked GM for as much as $6 billion worth of aid, people familiar with the discussions told Bloomberg News last month. The auto-parts company wanted to use the money from GM to trim expenses by offering some long-term workers bonuses to retire or accept lower pay, the people said. Aid from GM also would have been used to pay for pensions and health care for retirees, they also said.
Delphi's proposals were signed by Kevin Butler, vice president for human resources. The letter was sent to Richard Shoemaker, the UAW vice president for Delphi bargaining.
Survival at Stake
``Delphi cannot survive without significant modifications to the UAW-Delphi collective bargaining agreements,'' the letter said. The concessions required from the UAW could be even more severe, the letter said, if Delphi's finances continue to deteriorate as the company's management anticipates, according to the letter.
Delphi doesn't comment on union negotiations, company spokesman David Bodkin said yesterday.
UAW President Ron Gettelfinger and Vice President Shoemaker issued a joint statement Oct. 21 saying Delphi's proposal was designed to ``hasten the dismantling of America's middle class by importing Third World wages to the United States.'' The officials didn't disclose details of the company's proposal.
Shoemaker said a day earlier that the wage cuts demanded by Delphi, GM's largest supplier, may spark a ``conflict.'' He didn't elaborate.
Strike Threat
A UAW strike at Delphi could disrupt GM's North American assembly plants within 48 hours, McAlinden said. GM is now in the process of launching redesigned versions of its big sport-utility vehicles, such as the Chevrolet Tahoe. Those SUVs are among GM's most profitable vehicles, said David Healy, an analyst with New York-based Burnham Securities.
A strike would also disrupt operations at DaimlerChrysler AG's Chrysler unit and at Toyota Motor Corp.'s U.S. factories, both of which are supplied by Delphi, according to McAlinden. Delphi plans to ask a New York bankruptcy judge on Dec. 16 to scrap its union contracts if no agreements are reached before then.
Miller, in an interview Oct. 21, said that to survive, Delphi needs to compete with other auto suppliers that pay $20 an hour for wages and benefits, or less than one-third the rates Delphi inherited from GM when it was spun off in 1999.
Jobs Bank
Delphi also wants to eliminate the ``jobs bank'' of union employees who are being paid although they are not working, according to Butler's letter. The company had 4,000 workers in the bank at the start of October.
Delphi wants to reduce holidays by 40 percent to 10 per year. The week of Christmas would continue to be an off week only if negotiations in other areas succeed, the letter said.
No Restrictions
The company's proposed new contract would also scrap restrictions on Delphi's right to sell or close factories, or to ship work to outside suppliers, the letter said. The new contract would eliminate any contractual provisions on the company's ability to hire temporary workers.
Delphi's proposal would limit the number of UAW representatives in the company's factories with 750 workers to three, according to the letter, even if that means eliminating jointly appointed officials who are now assigned to projects for boosting safety or quality, the letter said.
Butler's proposal would also eliminate the union's right to strike. In addition, it includes five pages of factory-specific agreements that would be scrapped. The oldest dates back to 1979, when management of what is now a Delphi factory in Adrian, Michigan, agreed that if twelve or more ``skilled trades'' workers such as machinists were assigned to work, an additional ``tool crib'' worker would be available to distribute equipment to those workers.
Share of GM rose 13 cents to $29.41 at 10 a.m. in New York Stock Exchange composite trading. |
