By DEREK R. SMITH, Kokomo Tribune business writer
Friday was a bittersweet day for Delphi Corp. workers in Kokomo.
The nation’s largest automotive supplier is asking a federal bankruptcy judge to terminate its labor contracts. It also seeks to cut 8,500 salaried jobs as part of a broad transformation plan that emphasizes the importance of Delphi’s Kokomo operations.
It also wants to freeze pension benefits to hourly and salaried workers and replace them with plans that require employee contributions with company matches.
“It will be impossible to avoid a long strike” if a federal bankruptcy court agrees to void union contracts and the company imposes its most recent wage proposal, the United Auto Workers warned Friday.
Analysts say a strike would be catastrophic to General Motors and hurt other auto manufacturers and suppliers of all sizes.
Judge Robert Drain has scheduled a hearing on Delphi’s request to void its contracts for May 9-10.
Workers not surprised
B.J. Casteel, a Kokomo worker of 26 years, said she wasn’t surprised by Delphi’s announcement.
“It’s not fair what they’re doing,” she said. “We’ve seen it coming down the road for years. It’s nothing new.”
CEO Steve Miller said Friday, “we simply cannot continue to sell products at a loss.”
“We are clearly focused on Delphi’s future,” Miller said. “Emergence from the Chapter 11 process in the U.S. requires that we make difficult, yet necessary, decisions.”
Delphi spun off of General Motors Corp. in 1999. The Troy, Mich.-based supplier filed for Chapter 11 reorganization in October, citing globally uncompetitive costs.
How Kokomo fits in
The company said Friday it plans to abandon certain product lines and sell or close 21 of its 29 U.S. plants by 2008.
Kokomo is world divisional headquarters of Delphi Electronics & Safety and home to about 5,200 of the division’s 29,900 employees.
Delphi listed Kokomo as one of eight U.S. “core automotive facilities.” It also listed occupant safety, safety electronics, entertainment and communications among its “core strategic product lines” of the future.
Other core facilities identified by Delphi are in Brookhaven, Miss.; Clinton, Miss.; Grand Rapids, Mich.; Lockport, N.Y.; Rochester, N.Y.; Warren, Ohio, and Vandalia, Ohio.
Delphi spokeswoman Claudia Piccinin said Delphi determined its core facilities by focusing on the technologies where it has a competitive edge and where it anticipates future growth and profitability.
During a visit to Kokomo last September, Miller said Kokomo’s operations have “market-leading technologies.”
“That’s why we have a large salaried and engineering employment base here,” he said. “Hopefully, we can retain the bulk of that employment.”
No specifics yet
Piccinin said Friday it’s too soon to discuss specifics of how Delphi will deal with individual plants, but some products lines could be relocated from non-core facilities to core facilities.
Delphi has about 185,000 workers in six divisions worldwide.
The company said Friday it plans to eventually close or sell about one-third of its global manufacturing sites. Piccinin said it is too soon to discuss those locations.
Delphi’s international locations are not subject to its Chapter 11 filing.
The company has 76,500 workers in Mexico and South America; 51,000 workers in Europe and the Middle East; 47,500 workers in the U.S. and Canada, and 10,000 workers in the Asia Pacific region, according to a presentation the company gave at a February creditors meeting.
Strike down the pike?
Delphi has been in intense negotiations with GM and the UAW in recent weeks. Although the parties reached a landmark retirement buyout last week, they have been unable to reach a comprehensive agreement.
Delphi also is asking the court to reject its unprofitable contracts with GM.
“We disagree with Delphi’s approach, but we anticipated that this step might be taken,” Rick Wagoner, GM’s chairman and CEO, said in a statement. “GM expects Delphi to honor its public commitments to avoid any disruption to GM operations.”
Piccinin said Delphi remains committed to reaching an agreement with the UAW and GM.
“A strike isn’t in any party’s best interest,” she said. “We feel like we have enough time to get this done.”
Analyst’s view
David Cole, chairman of Center for Automotive Research in Ann Arbor, Mich., said Friday’s announcements don’t change anything in Delphi’s negotiations with GM and the UAW, except to add a further sense of urgency.
“My guess is it will get done, but it’s not going to be easy,” he said.
Cole said he anticipates negotiators will reach a comprehensive deal in mid-May, ahead of UAW elections in June.
Analysts with AutoPacific and Edmunds.com were unavailable Friday.
Hard to follow
Jim Whitehead, a 39-year-old Kokomo Delphi electrician, said some developments in the bankruptcy proceedings have been confusing.
“I’m really not sure what’s going on,” he said. “We hear about what’s going on, but we really don’t know what’s going on as far as what they’ve actually decided.”
Whitehead said Delphi’s proposed wage cuts would be difficult, especially for workers with families. He said he thinks Delphi workers will eventually strike.
“It’s kind of hard to go from what we make and drop to $10 an hour,” he said. “I want this company to be around. I really don’t mind sacrificing a little bit, but I’d still like to be able to make a decent wage.”