USA TODAY, March 31, 2006, Friday

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USA TODAY

March 31, 2006 Friday
FINAL EDITION

SECTION: MONEY; Pg. 1B

HEADLINE: Delphi, UAW hit dangerous impasse over pay cuts;
Strike could be disastrous for auto-parts maker, GM

BYLINE: Sharon Silke Carty
http://www.usatoday.com/money/autos/2006-03-30-delphi_x.htm

BODY:
DETROIT -- Auto-parts supplier Delphi and its largest union, the United Auto Workers, early today appeared to be stalemated over proposed pay cuts that Delphi says it needs to make itself competitive again and emerge from Chapter 11 bankruptcy protection.
Delphi has said that if a settlement weren't negotiated by Thursday, it would file a motion today in bankruptcy court to void its labor contracts. That sets up a contentious battle with its unions, which have promised to strike. A strike could have ominous implications for ailing automaker General Motors, which relies on Delphi for parts. A work stoppage could shut down GM plants in 48 hours for lack of parts.
Paul Krell, a spokesman for the UAW, said talks are ongoing. But the union is already preparing for Delphi to go ahead with its filing. UAW Vice President Richard Shoemaker sent a note to local union leaders Wednesday saying he expects Delphi to make the filing at 9:30 a.m. ET today. A Delphi spokesman did not return a call for comment.
Earlier in the week, Delphi sent union leaders a proposal that would cut workers' salaries 39%. The unions flatly rejected it.
A strike is not necessarily imminent. A court hearing on the matter won't happen until early May, and the judge could give both sides more time to work out an agreement. "Bankruptcy courts do not like to impose harsh reductions in labor agreements," said Jay Waks, chair of the employment and labor group at law firm Kaye Scholer. "Huge changes imposed by the court never work well."
Anthony Sabino, a professor at St. John's University Peter J. Tobin College of Business, said Delphi and the unions are playing a perilous game that guarantees no winners if the unions strike.
"That's a very dangerous thing for everybody involved," Sabino said. "Unequivocally, it is in no one's best interest for there to be a strike. For Delphi, it means a complete loss of income. ... For the unions, there may not be a Delphi for them to come back to."
Still, the union is gearing up. It would take less than a week to complete a strike-authorization vote, which the UAW needs before it can exercise that option. The union has $880 million in its strike fund, which it would use to pay striking workers $200 a week, and to pay for their health care.
Merrill Lynch analyst John Murphy said in a recent research note that a strike could have "a devastating impact" on GM, other makers and other suppliers. Delphi's big customers also include Ford Motor and DaimlerChrysler.
"GM, specifically, would bleed enormous amounts of cash," Murphy said, estimating that the first 60 days of a strike would cost GM up to $8 billion.
Disruptions could ruin GM's planned rollout of high-profit pickups and an array of other models this year that it hopes will make it profitable. GM lost $10.6 billion last year. A 1998 strike lasting 47 days cost GM $1.6 billion. "An equivalent strike today would be significantly more expensive," Murphy said.