Delphi, Uaw Labor Deal Approved

A federal bankruptcy judge approved yesterday a new labor deal between the Delphi Corp. and the United Auto Workers (UAW) that offers senior workers cash payments in lieu of reduced wages and benefits.

The much-awaited court approval pushes the auto supplier one step closer from bankruptcy protection. “I will approve the settlement. It’s clear to me that the settlement meets the all of the tests,” said U.S. Bankruptcy Judge Robert Drain of the UAW deal.

Drain said that the labor pact was fair, reasonable and thoughtfully negotiated. Additionally, the only objection was a single letter from an employee. The judge noted that 68 percent of UAW workers approved the deal in June.

The court approval is a major milestone, averting Delphi’s other option, which was to petition the court to invalidate its union contracts and allow the company to impose lower wages, said the Detroit News. The union said that the move would provoke a strike, an occurrence that could have crippled the auto supplier. Currently, the company is in talks with and must still reach pacts with its five other smaller unions.

Delphi’s lead bankruptcy attorney, Jack Butler, said that the labor pact was “carefully negotiated” adding the company was pleased a deal had been reached after long talks. “This is an appropriate settlement,” he said.

One of the key reasons that triggered the auto supplier to declare bankruptcy in October 2005 was because it said that it had unsustainably high costs and could not convince its unions to give up its wages and benefits it had won at the bargaining table.

Troy-based Delphi announced last Friday that it had rejected a $3.3 billion financing proposal from Highland. The disclosure shows Delphi actively considered both deals until nearly the very last minute and shed more light on the details of the new financing deal announced on Wednesday.

But Highland said in a filing Friday that it planned to push its bid. The company was asking for more meetings with Delphi and planned to “seek support from interested parties.” The Detroit News reported June 15 that people involved in the transaction said a “bidding war” for Delphi could emerge in bankruptcy court.

In June, UAW members approved the new labor pact, which includes payments for longer-term workers who will concur to take a reduced hourly wage in connection with newer workers. The auto supplier, meanwhile, will close 11 of 21 UAW represented plants. It will run four while seven will be sold. As such, UAW members at Delphi will drop from 17,000 to about 10,000 or 11,000 in the next few years, UAW President Ron Gettlefinger said.

The pace of the progress is as fast as Borla performance. To stress, almost all of the terms of the pact will go into effect immediately. One exception is Delphi’s plan to freeze its pension plan. In the previous year, Delphi said it planned to freeze pensions for hourly and salaried workers in the first half of 2007.

Butler said that the auto supplier currently had 165,000 employees, down from 185,000 worldwide when it filed for Chapter 11. The fate of Delphi’s eight other plants in the United States will be determined at the bargaining table. Talks led by John Sheehan, Delphi’s chief financial officer, were continuing in Troy late Thursday with the two unions.

The company filing also reveals that the Appaloosa-led team will get up to $64 million in fees paid by Delphi, as well as unspecified “out of pocket” expenses, The News said. In addition to Appaloosa, the other investors are Harbinger Capital Partners; UBS Securities; Merrill Lynch, Pierce, Fenner & Smith Inc.; Goldman Sachs and Pardus Capital Management.

Mike Bartley, 49, is a professional automotive journalist domiciled in Irvine, CA. He travels from one state to another to cover the hottest auto shows, racing events and automotive revelations. His penned compositions cover press releases, reviews, and suggestions. Where the auto action is, that’s exactly where you can find Mike.
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