Union Says It's a Delphi Pawn

GM Is Central to Bankruptcy Case

NEW YORK, May 9 -- Delphi Corp.'s petition in a New York federal bankruptcy court Tuesday for permission to dismantle its union contracts elicited rounds of sparring about the only stakeholder not present in the standing-room-only courtroom: General Motors Corp.

The United Auto Workers, one of several unions whose representatives testified in court Tuesday, said Delphi rushed to court to void its labor agreements mainly to pressure GM, its largest customer, into kicking in money toward pay and benefits for the auto parts maker's 33,000 hourly unionized U.S. workers.

"Delphi's ingenious plan is to have someone else pay for the mess that Delphi has created," Bruce H. Simon, the UAW's attorney, told the court. "What they've really done is make employees of Delphi mere pawns in Delphi's broader dispute with GM."

Since filing for bankruptcy protection in October, Delphi has pressed for wage concessions from the unions to stave off the company's collapse. When the unions resisted, Delphi asked Bankruptcy Judge Robert D. Drain to dissolve the labor contracts. The unions have threatened to strike, which could paralyze production lines at GM, the world's largest automaker.

Delphi, once the auto parts division of GM, was spun off as a separate company in 1999.

Though no one from GM testified at the hearing, the company created a stir in the stock market after revising its first-quarter earnings on Monday. Instead of losing $323 million in the quarter as previously announced, GM said it earned $445 million because of a change in accounting for the cost of a retiree health-care fund. GM shares closed at $25.80, up $2.25.

Still, the automaker has the task of reversing last year's $10.6 billion loss. In a meeting with reporters in Detroit on Tuesday, GM chief executive Rick Wagoner said he does not think chipping in money for Delphi's workers is an "optimal" way to avert a strike. Though Wagoner said he does not expect a strike, he also said GM is stockpiling parts from other suppliers just in case.

In court Tuesday, Delphi said it would prefer to settle. Otherwise, it must get rid of its contracts through litigation because it cannot survive with the status quo until September and October, when its labor agreements expire, argued John Butler Jr., Delphi's attorney. If Delphi does not regain its competitive footing in North America, it will damage its relationship with GM and automakers overseas, he said.

"This structure cannot survive through the next winter," Butler said. "That stark reality has been and will continue to be extremely painful."

Butler chastised the unions for not making counterproposals to two wage-and-benefit packages offered by Delphi in recent months.

The unions said the proposals were not made in good faith. One would have deeply slashed wages to unacceptable levels and was withdrawn, making it impossible to make a counteroffer, they said. The most recent proposal offered Delphi workers $16.50 an hour with Delphi paying $12.50 and GM paying the rest -- which GM has not agreed to do.

In court filings, Delphi projects that it will lose $11 billion to $13 billion over the next five years if the contracts remain as they are.