Delphi Puts Off Court Action

Progress Cited in Talks to Cut Labor Costs

Cheri McLaughlin, a Delphi toomaker, opposes invalidating union contracts. (By Rebecca Cook -- Reuters)

Auto parts giant Delphi Corp. yesterday delayed for a second month any action in bankruptcy court to invalidate labor contracts that cover thousands of employees and retirees.

Delphi cited progress in negotiations that involve the United Auto Workers union and General Motors Corp. Delphi -- which is GM's largest parts supplier and has been operating under Chapter 11 bankruptcy protection since October -- now says it aims to make a deal with all sides by March 30. The talks, which focus on reducing Delphi's labor costs, have been going on since late last year.

Delphi officials and other U.S. auto industry executives say high labor costs are crippling their competitiveness. The companies are confronted by an onslaught of low-cost foreign rivals that have entered the auto parts sector.

In December, Delphi extended its deadline until yesterday.

Delphi, based in Troy, Mich., was spun off from GM in 1999. Delphi officials have complained about the cost of the unionized workforce it inherited from GM after the spinoff. Delphi initially proposed reducing pay by more than half, to as little as $9.50 an hour.

The bankruptcy court this month approved a six-month, $21 million plan to help retain Delphi's top executives, despite criticism from organized labor.

David E. Cole, chairman of the Center for Automotive Research, who is following the negotiations, said they are progressing. He said part of the solution involves many Delphi workers "flowing back" to GM employment rolls. GM has 105,000 hourly employees and a high attrition rate. Cole said GM could lose about 45,000 people to retirement in the next few years. Those losses would help GM reach its goal of cutting 30,000 factory jobs in the United States and still leave slots for current Delphi workers.

Delphi has 33,000 employees at 31 plants in 13 states. About 24,000 of them are represented by the UAW and 6,000 are represented by other unions.

Cole said such a flow-back plan is "complex stuff" that has to be negotiated plant by plant where older workers are being lured into retirement with buyout offers.

"A solution is doable, and it's progressing," Cole said.

The UAW, in a written statement, said Delphi's decision to delay the court action was a "positive step." Steve Miller, Delphi chairman and chief executive, said in a written statement that he remained committed to reaching a deal, though "major obstacles and difficult issues remain."

When GM and Delphi separated, the UAW negotiated continuing wages, pensions and health care coverage that were about equal to what workers received as GM employees. GM -- the world's largest automaker -- also agreed to pay those employees' retirement costs if Delphi filed for bankruptcy. GM has said it could be liable for as much as $11 billion in such pension costs. In the fourth quarter, GM took a $2.3 billion after-tax charge to put money aside for those liabilities.

GM faces the threat of a strike if the sides are unable to come to a deal. The automaker is heavily dependent on Delphi parts. For example, Delphi supplies heating and air-conditioning units for GM's full-size sport-utility vehicles, the success of which are key to GM's ability to reverse steep financial losses. In recent years, GM executives working with UAW leaders have defused union-related problems that could have led to strikes. Last year, GM and the union agreed to cut GM's skyrocketing health care expenses.

Rick Wagoner, GM's chairman and chief executive, has cited the resolution of the Delphi situation as a major company priority. GM is suffering the effects of an $8.6 billion loss in 2005 and falling stock prices and bond ratings. The company has been hounded by stock and bond analysts who predict bankruptcy for the company, which they say would be more likely if there were a strike.