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   Vol. 70/No. 15           April 17, 2006  
 
 
Largest U.S. auto parts maker,
Delphi, to void union contracts
(front page)
 
BY BRIAN WILLIAMS  
Delphi Corp., the largest auto parts producer in the country, asked a federal bankruptcy court on March 31 to void its labor contracts with several unions so it can slash wages and lay off many of its 32,500 production workers in the United States. The company, which filed for bankruptcy October 8, plans to close 21 of its 29 U.S. plants. The plants slated for closure employ 20,000 workers. Delphi also plans to freeze the employees’ pension plan in October and eliminate retiree health-care benefits as of July 1.

Delphi is the largest U.S. auto parts supplier. Its largest customer is General Motors, which spun off the company into a separate entity in 1999. Delphi sells $15 billion in parts annually to GM, with another $13 billion going to other customers, including Toyota and Ford.

Prior to filing its request in a bankruptcy court, Delphi offered union members wage cuts of up to 40 percent. This would involve an immediate $5 hourly pay cut to $22 for production workers, and in September 2007 a further reduction to $16.50 an hour. The company also promised that those still working who accept these cuts would get a “wage buydown” payment of $50,000 each.

The United Auto Workers (UAW), which represents 24,000 union members at Delphi, rejected this proposal. Some 8,000 other Delphi workers, who belong to the International Union of Electronic Workers-Communications Workers of America, have already voted to authorize strikes.

If the bankruptcy court rubber stamps the company’s quest to annul the contract, “It appears that it will be impossible to avoid a long strike,” said a statement issued March 31 by the UAW.

“A strike at GM’s biggest supplier could shut down the auto maker’s assembly lines within days, costing it as much as $130 million a day in the first two months,” noted an article in the March 31 Wall Street Journal. “Ultimately, the prospect of bankruptcy for GM is inevitable,” Kevin Tynan, a senior analyst at Argus Research, told the Investor’s Business Daily. “If there is a strike it accelerates the timeline.”

GM has guaranteed benefits to thousands of Delphi workers. Without funds from GM, noted the April 1 Journal, all Delphi production workers “would get an immediate cut in pay to $12.50 an hour, and no dental coverage.” In March, Delphi, GM, and the UAW agreed to push about 13,000 hourly Delphi workers into retirement and transfer 5,000 others back to GM.

The bankruptcy court is scheduled to hear arguments in early May on Delphi’s request to tear up its union contracts, with a decision expected to be issued by the judge in June.
 
 
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