Buffalo News (New York), April 3, 2006, Monday

Copyright 2006 Buffalo News
Buffalo News (New York)

Distributed by Knight/Ridder Tribune News Service

April 3, 2006 Monday

SECTION: BUSINESS AND FINANCIAL NEWS

HEADLINE: U.S. auto industry may never be the same

BYLINE: David Robinson, The Buffalo News, N.Y.

BODY:
Apr. 3--Phew! It looks like Delphi Corp.'s Lockport plant is out of the woods.
But with Delphi and the United Auto Workers still squabbling over the deep wage cuts the auto parts maker is seeking, there's still a chance that the woods might catch on fire.
"They're breathing a sigh of relief right now," says Arthur Wheaton, an industry education specialist at Cornell University's School of Industrial and Labor Relations in Buffalo who closely tracks the auto industry.
"They're saved for now, but that list isn't final yet," Wheaton says of the eight U.S. plants that Delphi plans to keep open, pending the approval of a U.S. Bankruptcy Court judge. "They're still sweating it."
Still, it's a welcome bit of relief for the Buffalo Niagara region, which had been facing the loss of all 3,800 jobs at the Lockport plant. Yet even with the plant staying open, the company still plans to cut jobs and undertake a major restructuring of the plant to make it more productive and refine its product line, says spokesman Lindsay Williams.
Just how many jobs will be left is unclear at this time, but many of the reductions should come through the retirement incentives that Delphi and its former parent company, General Motors Corp., are offering. "Keeping it viable, even with a significant reduction in the work force, is important for the area," says William Ganley, an economics professor at Buffalo State College.
The remaining jobs probably will pay less than they do now, too. Just how much less is a big issue, one that potentially could lead to a strike that has the potential to devastate not just Delphi, but GM and other auto parts makers as well.
"Delphi is engaging in some brinkmanship," says Nullan Suresh, a University at Buffalo management professor. "They're antagonizing both GM and the UAW in the process."
GM reacted to Delphi's court filing Friday by saying it disagrees with the auto parts maker's approach. While Delphi says it wants to continue negotiations that had shown signs of making progress before Friday's filing, the UAW said that now, it doesn't see a basis for continuing discussions. And if the bankruptcy court, which will hold a hearing on May 9, throws out the union contracts and Delphi imposes its plan to cut wages from $27 an hour to $16.50, "it appears that it will be impossible to avoid a long strike," the UAW warns.
"Once you ratchet up the pressure and the tension, it makes it harder to go back to the table and negotiate," Wheaton says. "They're now farther away from a resolution. They've intensified the pressure by putting in a hard deadline. There's no time to waste for negotiations."
If there is a strike, it could have far-reaching consequences, not just for Delphi, but for GM, which could be pushed into bankruptcy within a few months. That could open the door for GM to follow Delphi's lead and ask a bankruptcy court to void its own contracts with the UAW.
"If there is a strike," Ganley says, "it could be devastating to the area, as well as to General Motors."
Wheaton also thinks the game of brinkmanship may have another purpose: "This may be scaring people to take more of the buyouts," he says. "If you can get large numbers of people to leave, that's progress."
In the end, the auto industry may never be the same, as the pressure from Delphi and a handful of other troubled parts makers -- not to mention GM and Ford Motor Co.'s own troubles -- send out powerful currents that threaten to reduce the industry's lucrative wages and benefits and shrink its work force. But if everything works out, at least there won't be a big, empty plant in Lockport. "It's definitely good news for the region," Suresh says. "The bad news is there's no way out for the union, but to accept wage concessions."
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