By DEREK R. SMITH, Kokomo Tribune business writer
About one-third of Kokomo’s 2,300 unionized Delphi Corp. employees will have a retirement incentive offer to weigh if a federal bankruptcy court approves a new buyout plan.
Delphi and General Motors Corp. announced Wednesday deals with the United Auto Workers union that would offer early retirement buyouts to 113,000 U.S. hourly workers.
About 100,000 GM workers will be eligible for payouts between $35,000 and $140,000, based on their years of service. The GM plan doesn’t require court approval.
GM spun off Delphi in 1999.
Delphi filed for Chapter 11 reorganization bankruptcy Oct. 8, citing globally uncompetitive costs.
How the plan works
Under Delphi’s plan, up to 5,000 workers would be eligible to return to GM, while 13,000 of the auto supplier’s U.S. hourly workers would be eligible for a lump-sum payment of up to $35,000 to retire.
Another buyout option would be available for Delphi workers with 27 to 29 years of seniority. Those workers would receive between $2,800 and $2,900 gross monthly wages for agreeing to retire at 30 years.
A Delphi employee accepting any retirement option can retire from Delphi, or can “check the box” and be considered a “flowback” to GM for purposes of retirement.
David Cole, chairman of Center for Automotive Research in Ann Arbor, Mich., said Wednesday’s agreement should prove a historic moment in union-management relations.
“This is very positive from Delphi’s perspective,” he said. “The real challenge, I think, is going to be managing this. You can’t take people out too fast without getting into some problems.”
‘Absolute gift’
Jim Hossack of the California-based consulting firm AutoPacific said it’s difficult to say how many workers might take the retirement options, but from his perspective it’s an easy decision.
“I would say this is an absolute gift,” he said. “Take the money and run.”
Kokomo is world divisional headquarters of Delphi Electronics & Safety and home to about 5,200 of the division’s 29,900 workers.
George Anthony, shop chairman for Kokomo’s UAW Local 292, said 784 local Delphi workers would be eligible for one of the retirement offers.
“As a whole, the union is not in favor of buyouts, but in this particular situation with Delphi, I think this will help us move forward on other issues,” he said.
Anthony said Local 292 was to distribute handbills Wednesday to notify workers of the buyouts. He said he doesn’t know how many would accept the offer, but “I’ve had dozens of people tell me they will take the package if it is offered.”
The Associated Press reports workers will have up to 52 days to decide whether to take the buyouts after they learn the details in plant meetings.
Critical milestone
Delphi said Wednesday’s agreement marks a critical milestone in its restructuring, but talks will continue with GM and the UAW in an effort to reach a comprehensive agreement no later than March 30.
If a comprehensive agreement isn’t reached by March 30, Delphi said it will file no later than March 31 to terminate both its collective bargaining agreements and its hourly retiree health care and insurance obligations.
“We remain focused on the transformation of Delphi in order to emerge successfully from the Chapter 11 reorganization process and provide a strong foundation for our future,” said Delphi president and chief operating officer Rodney O’Neal in a statement. “An accelerated attrition plan will help enable the transformation of our U.S. manufacturing and support operations into a much more competitive cost base.”
Strike less likely now
Hossack said Wednesday’s agreement makes a Delphi strike appear much less likely.
“I’m hopeful they can make a lot of progress before the end of the month,” he said. “Uncertainty isn’t good for anybody, including GM stock.”
UAW president Ron Gettelfinger and vice president Richard Shoemaker issued a joint statement Wednesday to the UAW leadership of GM and Delphi locals.
“Working out this agreement required an inordinate amount of time and patience due to the complexities posed by Delphi’s bankruptcy filing,” they said.
The statement says Delphi was expected to file a motion for approval of its plan Wednesday, and the UAW will file a motion that makes clear its differences with Delphi, but which supports the agreement.
Delphi said it would seek an April 7 court hearing for plan approval.
Kokomo Delphi worker Trisha Owsley said she expects the court to approve the plan.
“We figure the judge is going to OK all of this,” she said. “Why else would the union have passed out the fliers?”
Cole said he’d be surprised if the judge rejects Wednesday’s agreement.
“I’m sure the bankruptcy judge has his nose in the middle of this,” he said. “They want to see exactly this kind of thing that has happened.”
GM to pick up tab
GM said it has agreed to assume financial obligations for lump-sum payments made to eligible Delphi workers accepting normal or voluntary retirement incentives and certain post-retirement benefit obligations for Delphi employees who flow back to GM under the plan.
Cost will be incurred as employees agree to participate.
“When we announced the capacity rationalization and employment reduction plan late last year, we said we’d be working with UAW leadership to develop an accelerated attrition program that would help us achieve needed cost reductions as rapidly as possible, while at the same time responding to the needs of our employees,” said GM chairman and CEO Rick Wagoner in a statement.
“We are pleased this agreement will help fulfill that. In addition, the agreement will enhance the prospects of GM, the UAW, and Delphi to reach a broad-based consensual resolution of the Delphi restructuring.”
Hossack said GM’s new financial obligations are “probably all that GM can afford, maybe more than they can afford.”
GM’s struggles are far from over, Hossack said. He mentioned the contract negotiations scheduled for September 2007.
“I figure it will be another 18 months before the whole picture comes together,” he said.
Cole said the cost for GM is manageable — far less than the upper estimates for its Delphi liabilities.
The Associated Press contributed to this report.