The Washington Post, April 1, 2006, Saturday

Copyright 2006 The Washington Post
The Washington Post

April 1, 2006 Saturday
Final Edition

SECTION: Financial; D01

HEADLINE: Delphi Asks Judge to Cancel Labor Contracts

BYLINE: Sholnn Freeman, Washington Post Staff Writer

BODY:
Delphi Corp. yesterday asked a federal bankruptcy court judge to void its union contracts, which paves the way for lower wages and benefits for Delphi workers and increases the chance of a strike at the auto-parts giant.
At the same time, labor scholars said, Delphi's use of the bankruptcy court to attempt wage cuts further erodes the power of organized labor.
In its reorganization plan released yesterday, Delphi -- which filed for bankruptcy protection in October -- said it plans to eliminate 8,500 salaried workers and close or sell 25 U.S. plants, affecting 23,000 hourly workers.
Delphi's latest offer cuts wages to $16.50 per hour by 2007, down from $27 per hour. Newer workers would receive as little as $10 per hour. The United Auto Workers union, which represents most of Delphi's union workers, called the action outrageous and said a move to cancel the labor agreements would make it "impossible to avoid a strike." A court hearing on Delphi's request is scheduled for May 9 and 10 in New York.
Delphi chief executive Steve Miller said in a written statement that the company remained committed to working toward a deal. But Miller said that "at the end of the day, Delphi must be competitive in the global marketplace."
The UAW said it saw no basis for continuing discussions with Delphi. Besides the UAW, Delphi workers are represented by the IUE-CWA and the United Steelworkers union. Those unions have also opposed Delphi's labor proposals.
If Delphi wins in court, the company could impose its latest offer and the old union contracts would disappear, along with their no-strike clause. According to a union spokesman, UAW local presidents and shop chairmen are calling Delphi's offer unacceptable.
What's at stake with Delphi goes far beyond worker paychecks, labor scholars and industry analysts say.
"For five months, there has been a lot of rhetoric based on the 1950s-era notion that these companies are too big to fail," said Patrick L. Anderson, of Anderson Economic Group LLC in Lansing, Mich. "In 2006, not only is Delphi not too big to fail. It already has failed."
Anderson said if the UAW mounts a protracted strike, Delphi would be forced into liquidation and run the risk of bankrupting General Motors Corp., Delphi's top customer. GM already is facing significant market-share and financial losses.
Under the latest proposal, Delphi asked GM to supplement the wages of Delphi workers and give a one-time, $50,000 payment to union members who stay on at Delphi and take the lower wage scale. GM has not yet agreed.
Industrial labor contracts are broad agreements that govern health-care plans, retirement benefits, vacations, work rules, holidays, overtime pay, working conditions and job security, as well as hourly wages. Union workers are also protected by smaller interlocking agreements, called local contracts, that cover workers at individual plants.
Kate Bronfenbrenner, director of labor education research at Cornell University, said a move by the judge to void Delphi's labor contracts would represent more erosion of labor's power to enforce collective bargaining agreements.
"This isn't about money," Bronfenbrenner said. "This is about basic workplace rights."
She said workers primarily organize around issues of dignity, respect and justice in the workplace. She said when a bankruptcy court voids an agreement, the court is wiping away hard-fought worker protections against unfair working conditions, discrimination and arbitrary supervisor power.
"What in our laws and what in our democracy gives a bankruptcy judge the right to take away freedom of association and collective bargaining?" she said. "Bankruptcy judges should not have that power. Now they do."
Bronfenbrenner said the strategy of using the bankruptcy process to scrap labor agreements was pioneered during airline industry insolvencies in recent years. Yesterday, GM won court approval to cut more than $1 billion in retiree health-care benefits as it seeks to lower costs.
Union officials complained that Delphi is misusing the bankruptcy process to circumvent the collective-bargaining process.
UAW President Ron Gettelfinger and vice president Richard Shoemaker called Delphi's court request "a travesty and a concern of every American."
Delphi said it expects to emerge from bankruptcy in the first half of next year. As part of its restructuring, the company said it will reduce its executive ranks by 40 percent. Delphi is also freezing its pension plans for hourly and salaried workers. Workers will be moved to defined-contribution plans, such as 401(k) plans. Delphi has said its pensions are already underfunded by $4.3 billion.
Under an agreement announced last week, 18,000 Delphi workers are being offered buyout packages to retire early or transfer to GM's employee ranks. Delphi was a GM division until 1999, when GM spun it off as a stand-alone company. Delphi has struggled financially since the separation.
The split made Delphi responsible for wages, benefits and pensions for tens of thousands of union workers. The company has said its current wage rates are far too high compared to what competitors are paying in Mexico and other regions of the world where labor is cheaper.
Other forces have also hurt the company, including demands from automakers to cut prices, escalating expenses for raw materials and depressed production at GM because of the decrease in vehicle sales.
A spokesman for GM said the automaker will continue to negotiate an agreement. "Nothing changes if they go and file these motions," he said.
In a written statement, GM chairman and chief executive Rick Wagoner said: "We disagree with Delphi's approach but we anticipated that this step might be taken."