The momentous restructuring of the auto industry cleared another major impediment Friday with the announcement of a deal covering wage cuts and plant closures between Delphi Corp. and the United Auto Workers (UAW).
The pact includes a payout of $105,000 over three years that will be offered to about 4,000 of Delphi’s 17,000 UAW workers. In return, the workers’ pay will be cut from about $27 an hour to a maximum of $18.50 an hour by Oct. 1.
Delphi said that the pact negotiated with its former parent General Motors Corp. and UAW mirrors a “significant milestone” in its enduring journey since filing for Chapter 11 on Oct. 8, 2005. “If ratified, we believe this agreement will be a significant milestone in our transformation and a major step towards emergence (from bankruptcy),” said John Sheehan, Delphi’s chief restructuring officer.
Additionally, the pact could serve as a template for pay plans at other suppliers. Next week, union members are expected to vote on the pact. If ratified, the deal would allow Delphi to significantly trim down its overhead in a bid to vie for lower-cost international suppliers. The pact eliminates the threat of a potential strike that would cripple GM, Delphi’s biggest customer. The said situation would interrupt contract talks this summer between the Detroit automakers and the union.
“Delphi could have been a dark cloud hanging over the talks all summer,” said Harley Shaiken, a labor professor at the University of California-Berkeley. “It would have been particularly difficult for GM.” In a statement, the largest American automaker is “encouraged by the continued progress” in its talks with Delphi and the UAW, and is committed to reaching “a final resolution that will allow Delphi to emerge as a more competitive strategic supplier.”
Since the bankruptcy filing, Delphi has been a source of escalating tension, uncontrollable even by EBC brake rotors, for the U.S. auto industry and the union. Domestic automakers have taken dramatic steps to bolster survival in the industry. The Ford Motor Co. put virtually all of its U.S. assets up as collateral in a multibillion-dollar credit deal to fund its restructuring. Ford and GM slashed landmark health care deals with the UAW to cut costs. In addition, the Chrysler Group was sold to private equity firm Cerberus Capital Management LP earlier this year.
Details of the Delphi wage pact were withheld Friday, but people familiar with the talks said that 4,000 Delphi workers will be offered lump-sum payments of $35,000 annually for three years in exchange for pay cuts that would bring them from $27 an hour to a maximum of $18.50.
The rest of Delphi’s hourly work force are either hired after 2004 at lower pay rates or deemed temporary workers. “If it means I have a job for the next five years, that’s great,” said Scott Reed, 33, of Owosso, who works at Delphi’s Flint East plant and was hired at the lower wage. “As long as I have a job with benefits, I don’t care about anything else, except that we stay part of the UAW, too.”
UAW President Ron Gettelfinger issued a statement confirming a completed wage deal. Local union presidents are tasked to present the details of the pact to their members this week. While the union could not avoid concessions, it succeeded in keeping some plants open, and the wage terms are considerably better than Delphi’s original offer soon after it filed for bankruptcy. “It’s a good deal and a generous one, especially when you look at the context of the agreement with Delphi coming out of bankruptcy,” said one local president, who spoke on condition of anonymity.