Auto parts manufacturer Delphi Corp. reached a tentative wage-cutting agreement Friday with the United Auto Workers (UAW), its biggest union. The deal, which still must be voted on by Delphi members of the United Auto Workers, was signed just before a meeting between the UAW leadership and presidents of the union’s locals.
Details of the pact were disclosed but Delphi said in a statement that it is a “significant milestone” in the company’s quest to emerge from Chapter 11 bankruptcy protection. Union officials who spoke on condition of anonymity said the pact would cut wages for longtime UAW workers from around $27 per hour to between $14 and $18.50.
Industry analysts said that it could become a template for other parts suppliers. The pact, if approved, would end the threat of a strike that could have crippled General Motors Corp., Delphi’s largest customer. It brings to a stop two years of controversial negotiations in which the UAW threatened to strike.
Delphi, meanwhile, said that it needed lower wages to compete in a global economy. The former parts arm of GM, Delphi was set free as a separate company in 1999, filed for bankruptcy protection in October 2005 and asked for court permission to void its labor contracts. GM, on the other hand, is also part of the agreement because it is on the hook for an estimated $7 billion in liabilities for Delphi pension and retiree health care expenses.
The deal will have a much larger impact than just on Delphi and GM, said David Cole, the chairman of the Center for Automotive Research in Ann Arbor. “It’s a pattern supplier agreement,” said Cole, who added that sales of many factories by suppliers and even the Ford Motor Co. have been delayed while Delphi negotiations dragged on. “Nobody’s going to pick up any of these assets unless they have an agreement that they think is going to be competitive over the longer term,” he stressed.
While it likely was difficult for UAW leaders to agree to reducing wages, the union was probably able to preserve far more than the $9 per hour that Delphi proposed early in the bankruptcy proceedings, said Harley Shaiken, a professor at the University of California-Berkeley specializing in labor issues. “The agreement reflects the dismal context of the auto parts industry in a global world,” Shaiken added. “The $18 wage is approximately double what Delphi offered immediately after the bankruptcy. So they managed to salvage a much better agreement.”
UAW officials told local leaders last Tuesday that they would like to wrap up the Delphi matter before July 23, the formal start of national contract talks between GM, Ford Motor Co., DaimlerChrysler AG’s Chrysler Group and the UAW. That means voting likely would be scheduled before July 1 when GM’s plants go on a two-week shutdown.
The UAW leadership still must sell the deal to its 17,000 members who work at Troy-based Delphi. About 4,000 of them have been with Delphi long enough to be getting the higher wages. The remainder of Delphi’s 20,000 hourly workers will be represented by other unions.
Shaiken said that other parts suppliers likely will try to match or beat the Delphi-UAW wages, but the UAW would be reluctant to grant lower pay to healthy companies such as Canadian parts giant Magna International Inc. Delphi has said that it wants to close or sell most of its 29 U.S. plants as it restructures and shrinks itself into a smaller company. The company intends to concentrate on operating eight U.S. plants that make electronics, safety systems and mechanical parts. As such, the enhanced Saturn exhaust clamp, engines and other parts accessories are expected.