Car Parts Maker Moves to Break Its Union Deals

[ellives]

http://www.nytimes.com/2006/04/01/business...fUvdvtEuVokkYBQ

April 1, 2006

Car Parts Maker Moves to Break Its Union Deals

By MICHELINE MAYNARD

DETROIT, March 31 — Delphi, the nation's biggest auto parts maker, on Friday asked a federal judge for permission to throw out some of its labor agreements, a move that could cost 20,000 union workers their jobs and leave thousands of others with less than half their current wages.

Delphi, which is operating in bankruptcy, wants the judge's permission to impose sharply lower wages and benefits on six unions, setting up a confrontation that its largest union, the United Automobile Workers, said could lead to a lengthy strike.

A strike could also cripple General Motors, which spun off Delphi in 1999 and remains its biggest customer. And any harm to G.M. could eviscerate the U.A.W.'s own influence as one of the nation's most socially progressive and powerful unions, while accelerating the slide of the American auto industry.

Delphi said it would close or sell all but 8 of its 29 plants in the United States and cut 28,500 positions around the world. Beyond the 20,000 of its 33,100 hourly jobs in the United States that Delphi plans to cut, another 8,500 salaried jobs worldwide are to be eliminated.

"I took this job thinking this was my future," said Tracey Huffman, 37, staring blankly down at a table at Jamins, a pool hall next to the U.A.W. Local 651 hall on the east side of Flint, Mich. "Now I don't know. It's like starting all over again."

Ms. Huffman, who is scheduled to be laid off temporarily at the end of April, now fears that her layoff could become permanent. Any decision by the judge, however, is expected to be weeks or even months away.

The confrontation promises to become even more fierce in coming months, as G.M. tries to extricate itself from its worst financial crisis in over a decade, and the U.A.W. fights Delphi over the deep wage cuts that it wants to impose.

All sides could be losers. A strike by the U.A.W. could send G.M. into bankruptcy alongside its former parts unit, a fate that would be an even bigger debacle for the union and the industry than Delphi's bankruptcy has proved to be.

And unless a judge rejects Delphi's effort to abrogate its contract, the U.A.W. faces the prospect that it can no longer give its workers the security it has fought for years to provide, leaving the union's president, Ron Gettelfinger, distressed.

Already, some workers at the Delphi East plant in Flint left their plant in tears Friday, after learning that it was among 21 that would close. In 1998, a seven-week strike at that plant and another in Flint, nearly crippled G.M.

"I have to put my faith in the union," said Judy Steyer, 36, who dabbed her eyes as she walked on her lunch break.

Wearing a black sweatshirt embroidered with the U.A.W. crest, Mrs. Steyer continued: "I've been through one strike. It was tough then, and it'll be tough if we go on strike now."

David L. Gregory, professor of labor law at St. John's University in New York, said, "This is really for all practical purposes a frontal challenge to the reason for existence of the U.A.W."

The tangle comes as the American industry already faces stiff competition from Asian and European companies, which have wrested market share in automobiles and auto parts from their American rivals.

G.M., which lost $10.8 billion last year, is struggling to reverse a slide that has deepened under its chief executive, Rick Wagoner, while Delphi is one of half a dozen major American parts suppliers that have been forced to seek Chapter 11 protection.

G.M. has already stepped up several times to help Delphi, most recently last week, when it agreed to pay for bailouts covering 13,000 Delphi workers, in addition to 113,000 of its own, and to take 5,000 Delphi workers back to G.M. On Friday, Delphi said it hoped that many of the workers who will lose their jobs will have a "soft landing" because of the G.M. program.

This is going on, Professor Gregory said, while companies like Toyota, which is expected to earn $16 billion for the year ended Friday, are prospering and even building plants across the Midwest and South that are employing tens of thousands of Americans.

"The 20th century was the century of General Motors and America," Professor Gregory said. "The 21st century is going to be the century of Toyota and Asia."

While similar actions have occurred in the steel and airline industries, Delphi's move was the first time that a major player in the automobile industry had sought to void its labor contracts, setting the stage for a precedent-setting court ruling later this year.

Delphi plans to eliminate 21 factories in Michigan, New Jersey, Mississippi, Texas, Alabama and elsewhere.

"Emergence from the Chapter 11 process in the U.S. requires that we make difficult, yet necessary, decisions," Delphi's chief executive, Robert S. Miller, said in a statement Friday. "These actions will result in a stronger company with future global growth opportunities."

Once Delphi is finished with its restructuring, it will have a much more streamlined product line than the current wide array of components — from air-conditioning systems to steering gear to cruise controls — that it inherited from G.M.

Under Delphi's contract, which is essentially the same as the one covering workers at G.M., members of the U.A.W. are paid nearly $28 an hour in wages. Their total compensation, including pensions, health care and other benefits, is an average $78.63 an hour, Delphi said in court documents, a figure it said was three and a half times that at competing parts suppliers.

That number, however, struck analysts and union officials as too high; they generally estimate total costs to be about $67.

In its court filing, Delphi said it wanted to impose its last offer, which it made a week ago. That was for a $5-an-hour wage cut this year, to $22, followed by another cut next year to $16.50 an hour. To ease the pain, workers would be given $50,000 each, presumably provided by G.M.

If workers do not accept that deal — or if G.M. does not come up with the money — Delphi said it would impose a unilateral cut in wages to $12.50 an hour.

Though less than half what they make now, that is still more than Delphi's original offer to the U.A.W., made shortly after its bankruptcy filing, for wages as low as $9.50, a proposal that ignited outrage among union members.

The U.A.W. earlier this week rejected essentially the same proposal Delphi now wants a judge to approve, saying its members would surely vote it down. If those terms are imposed on the union, "it appears that it will be impossible to avoid a long strike," U.A.W. officials said.

Robert Betts, president of U.A.W. Local 2151 in Coopersville, Mich., home to one of the plants that Delphi intends to close, said the issue went beyond the parts maker.

"This is turning from a restructuring of a business into a basic struggle for workers' rights," he said. "Essentially what they want you to be is a very poorly paid indentured servant."

He added: "If we accept too low of a wage, it will affect workers everywhere."

Knowing the ramifications, bankruptcy court judges encourage labor unions and companies to reach agreements, rather than have lower rates imposed upon them. A hearing in the Delphi case is set for May 9, and the situation may not be resolved for weeks after that, allowing plenty of time to reach a deal — if the parties talk.

A number of unions in the airline industry have reached agreements with bankrupt companies in the last few years.

The U.A.W., however, has never been in this position with such a large company. And labor experts said it would be politically impossible for Mr. Gettelfinger to agree to all of Delphi's demands, because that would set a precedent for even more critical talks next year with G.M. and Ford.

Delphi has been included in the union's practice of "pattern bargaining," which essentially calls for the same terms at each company. Cuts granted at Delphi would open the door for the automakers to demand lower wages and benefits as well.

Although it has agreed to some modifications, particularly changes in health care coverage negotiated at G.M. and Ford last year, the U.A.W. has not granted pay cuts at a major auto company since it agreed to concessions with Chrysler in 1979 as part of its bid for a Congressional bailout. Those cuts were later restored.

Given that a strike is its only — and most lethal — weapon, Mr. Gettelfinger has to appear as if he is ready to wield it, experts said.

"There's always a lot of posturing," Ms. Steyer, the Flint auto worker, said. "It's like two big dogs. You growl, and I'll growl back."

But people in the union and in the auto industry who are acquainted with his thinking said Mr. Gettelfinger was loath to call a broad strike at Delphi, knowing it could lead to a bankruptcy at G.M. and an even bigger morass for the union.

That would not prevent him from strategic strikes, at a plant or two, if he felt it was necessary to send a message to Delphi, these people said.

Mr. Gettelfinger's reluctance to inflame the situation is a reason the U.A.W. has not conducted strike votes at any local unions, a formality that occurs before any walkout.

Quentin Garland, a 32-year veteran at the Flint plant who assembles cruise control mechanisms, said he understood the union's quandary. "A strike at this point doesn't help anyone," Mr. Garland, 51, said.

But Sue Gosner, 50, said she did not plan to wait around to see if that happened. She recently reached the 30-year mark that will allow her to retire with a $35,000 check from G.M.

"It's just been such an emotional roller coaster for so long now," Ms. Gosner said. "People just go in there and do the best they can do. That's all we can do."

Jeremy W. Peters contributed reporting from Flint, Mich.,for this article.

[thegriffon]

"That would not prevent him from strategic strikes, at a plant or two, if he felt it was necessary to send a message to Delphi, these people said."

hmm, like "only plants which supply Toyota, Honda Nissan etc.."

[CARBIZ]

"If we accepted too low a wage, it will effect workers everywhere."

??????????????????

That is the point: Delphi's wages aren't competitive. They are paying far more than most other parts makers. I feel the pain of these workers, but they have been living in a dream world for a very long time now.

This battle is going to have very long term ramifications for North America. I am afraid we are watching history in the making.