Delphi Proposes Slashing Wages

Plan Includes Retention Bonus

Troubled auto parts maker Delphi Corp. has proposed cutting union hourly wages by more than one-third, to $16.50, by the end of next year, as the company seeks to emerge from bankruptcy protection, according to a Michigan union leader familiar with the offer.

Part of its proposal sent to United Auto Workers leaders over the weekend includes a $50,000 payment as an incentive to eligible Delphi workers who want to remain at the company at the lower wage scale, the union leader said.

Delphi proposes a permanent cut in wages to $22 from $27 per hour immediately, then to $16.50 per hour in 2007. It also proposes to start new workers at as little as $10 per hour.

Union officials now must weigh the gain-some-now, lose-some-later offer as a Friday deadline looms. Delphi has said it will ask a bankruptcy court to void the $27-per-hour wage Friday and impose a lower wage structure if no deal with the union is struck.

In addition to reducing payroll costs, Delphi may want to cut its workforce further and close or sell plants. Last week, General Motors Corp. -- Delphi's former parent -- offered buyouts to 13,000 Delphi employees and said as many as 5,000 of them could "flow back" onto the GM payroll at the auto giant's plants.

A UAW spokesman confirmed that top union officials received the new offer on Friday but declined to comment on the details. He said negotiations were ongoing. GM declined to comment.

The complex three-party negotiations are the result of Delphi's spinoff from GM in 1999. Because of existing union contracts, Delphi was forced to pay the $27-per-hour wage the workers had received as GM employees.

To complete the spinoff, GM accepted responsibility for pension, health-care and other benefits of UAW workers if Delphi became insolvent. In recent years, Delphi has been undercut by foreign rivals that can make parts more cheaply and by Detroit automakers, which have demanded price concessions and reduced manufacturing output, leading to less demand for parts. Both factors led to the company's October bankruptcy filing.

A Delphi spokesman said the new proposal, which details wages under various scenarios, is contingent on GM partially subsidizing the new wage scales. GM has estimated its Delphi liability to be as high as $12 billion.

GM is already cash-strapped and hobbled by a number of financial problems. The automaker lost $10.6 billion in 2005, its biggest loss since 1992, and has said it will restate earnings from 2000 to 2004. UAW leaders have suggested that a Friday move to nullify contracts could lead to a strike at Delphi. A strike there could cripple GM, which is heavily dependent on Delphi for parts.

According to the Michigan union official -- a UAW local president who spoke on condition of anonymity because he is still reading the proposal -- the new Delphi wage proposal includes additional pay cuts that would continue to lower union wages, hitting $16.50 per hour by 2007. Entry-level workers at Delphi would make about $10 an hour to $11 an hour under certain conditions, the official said.

Local UAW leaders already have a lot of material to digest. Yesterday, they were still combing through the new offer, which includes dozens of pages of details and supplemental information. Add to that last week's offer, in which GM proposed $35,000 to $140,000 buyouts to 126,000 GM and Delphi employees. Many of the UAW local leaders began arriving for meetings in Detroit yesterday with stacks of questions from factory workers weighing the GM buyouts.

The Michigan UAW leader said the latest offer would be a hard choice because the pay cut is targeted at new workers. He called the $10-to-$11 hourly rate extremely low. He said it could lead to erosion in pay at other auto parts makers with UAW-represented workers. "We would be in jeopardy of establishing a new floor wage for labor" in the sector, he said.

Delphi chairman and chief executive Steve Miller has been demanding lower wage scales to keep Delphi competitive in the increasingly global marketplace for vehicle parts. But he outraged the UAW and other unions representing workers at Delphi last October when he proposed slashing wages to $9.50 per hour. They also vented anger at an attempt by Delphi to sweeten severance packages for executives during bankruptcy hearings. At the time, UAW President Ron Gettelfinger called the matter a "disgusting spectacle." Michigan Gov. Jennifer M. Granholm (D) denounced the proposed wage-scales as "brutal, draconian" pay cuts.

Delphi, like other parts suppliers, has been suffering from tough price competition with rivals that are operating in countries where labor is cheaper. Parts suppliers are also wrestling with the impact of escalating costs for steel and other raw materials.

Staff writer Amy Joyce contributed to this story.