Delphi Corp. expects to have as few as 2,300 United Auto Workers members working in four remaining plants by 2012, the company said in a court filing this week. The estimates clearly picture how drastically the giant auto supplier is shrinking in the United States.
When Troy-based Delphi filed for Chapter 11 in October 2005, it employed more than 24,000 UAW workers, including about 10,000 in Michigan. Only Detroit’s Big Three employed more. Since then, Delphi’s UAW membership has dropped to about 17,000 due to early retirement programs and buyouts.
By the end of this year, the auto supplier will have 4,703 UAW employees, Delphi said. That will fall to between 3,101 and 3,604 by 2011, depending on new business added at the four UAW plants that the company intends to keep open in Kokomo, Ind.; Lockport, N.Y.; Rochester, N.Y.; and Grand Rapids. Total UAW employment could plunge to as low as 2,306 in 2012.
Of those plants, Grand Rapids is expected to slightly gain employment. According to charts attached to the recently ratified UAW-Delphi contract, which was part of a 996-page document that Delphi filed in New York bankruptcy court this week, from 535 workers in this year, the figure will be increased to about 543 in 2011.
Despite the cuts, Wall Street was counting on downsizing to be even deeper. CRT Capital Group LLC auto analyst Kirk Ludtke said the 2011 UAW staffing levels “are higher than the preliminary estimate (of about 1,600 UAW workers) we made late last week.” But Ludtke concluded in a research note Friday the contract that Delphi reached with the UAW will allow the company to reduce its work force “to a level at which Delphi should be able to reach its long-term potential.” He rates Delphi stock a “buy.”
Delphi spokesman Lindsey Williams noted that the company earlier had announced its intention to exit 21 of 29 core businesses. As a result “you’re going to be a smaller business,” Williams said.
Of 21 UAW plants, the giant auto supplier will continue to operate four, sell seven to other parties and close ten. Some employees will be eligible for $105,000 buy-down payments over three years, and others may get relocation allowances of up to $67,000 when plants close. About 12,400 UAW-represented Delphi workers opted to retire by Jan. 1, 2007, while 1,400 took buyouts.
Delphi and the UAW reached a contract last month that voting union members subsequently ratified by 68 percent. Federal bankruptcy Judge Robert Drain will decide on July 19 whether to approve the contract, which will reduce the auto supplier’s labor costs and help it emerge from bankruptcy this year.
Delphi has withdrawn motions asking Judge Drain to void its collective bargaining agreements and allow it to unilaterally reduce the benefits of certain UAW retirees. The company hopes to reach a pact with its five other smaller unions by Aug. 16, the date of another court hearing. It is in “active bargaining” with its the International Union of Electronic, Electrical, Salaried, Machine and Furniture Workers and the United Steelworkers.
Like the Chevrolet pickup ground effects, the Delphi is attracting so much hype. It’s not clear if a rival bid will come out. Highland Capital Management LP, the Dallas-based private equity firm, renewed its interest in Delphi after the court rejected its first bid earlier this year. Other investors also could add to A Appaloosa Management LP’s bid.
Pardus Capital Management, meanwhile, has joined the Appaloosa group which intimated its desire to invest $3.4 billion for 70 percent of Delphi ownership. But the court must still approve a financing plan.