CHICAGO – Auto parts maker Delphi Corp. said it will move on Friday to void its U.S. labor contracts and unprofitable deals with former parent General Motors Corp., and that it will shed up to 8,500 salaried workers and cut its global plant base by a third.
The sweeping cuts were expected to be a key part of Delphi's attempts to emerge from bankruptcy and Delphi's chief executive said the company has made recent progress in its talks with union leaders and GM.
Delphi, which filed for bankruptcy protection last October, also said it would eliminate up to 40 percent of its corporate officers as it exits numerous noncore businesses. The supplier said it expects to sell or close one-third of its global manufacturing sites by 2008 to focus on profitable product areas including electronics, navigation and safety. It identified only eight U.S. manufacturing sites as core.
Delphi said it expects to file the motions later on Friday. The filings do not immediately permit unions to call strikes that could shut Delphi and hobble GM at a time when it is hoarding cash and releasing key new models, but union leaders have said it could put a damper on talks. Delphi, which GM spun off in 1999, said hearings on the labor motions would start May 9 in New York bankruptcy court, but it remains in talks with GM and its unions to try to reach agreements to make its remaining U.S. operations profitable. "Emergence from the Chapter 11 process in the U.S. requires that we make difficult, yet necessary, decisions," Chief Executive Steve Miller said in the statement, adding that he had seen progress in talks with GM and the unions.
Delphi in October put its U.S. operations in Chapter 11 mainly to slash wages and benefits of hourly workers and close a significant number of plants to reverse losses in North America. International units were excluded from the filing. The company had said it needed at least the framework of an agreement by Thursday with GM and the unions that represent most of its 34,000 U.S. hourly workers, or it would file the motions in the U.S. Bankruptcy Court in New York on Friday. Delphi made progress on one front, reaching a basic agreement that could make up to 17,000 blue-collar workers retirement-eligible and allow another 5,000 to return to GM.
However, the United Auto Workers and the International Union of Electrical Workers- Communications Workers of America rejected Delphi's most recent wage and benefit proposal earlier this week, setting the stage for the Friday court filing. It was not immediately clear how many hourly workers Delphi would need to operate the eight core U.S. manufacturing sites it expects to keep. However, the company said it has about 18,000 hourly and salaried workers at the plants, which would need restructuring, including some job cuts. The motion to reject GM contracts covers about half of the North American purchase volume revenue of about $7 billion from the automaker.
Delphi also has asked GM to reset terms on more than 400 other agreements. "We need GM to cover a greater portion of the costs of manufacturing products for GM at plants that bear the burden of our legacy costs," Miller said. "We simply cannot continue to sell products at a loss." Delphi said it plans to focus on products where it has significant competitive and technological advantages and growth prospects in the automotive sector and adjacent areas such as commercial vehicles, medical systems, aerospace and telecommunications. Areas due to be phased out include brake and chassis systems, cockpits and instrument panels, and door modules and latches, among others. Many noncore businesses could be successful under other ownership, the company said.
Delphi hopes to save about $450 million per year through the salaried work force cuts and other improvements. The company also plans to freeze its U.S. pension plans for hourly and salaried workers to maintain benefits accrued. It will offer defined contribution plans for salaried workers and hourly workers who are more than seven years from retirement. However, Delphi said it will still need outside help from the Pension Benefit Guaranty Corp. and others to extend contribution funding over a longer period.
David Bailey, Reuters 31.3.2006
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