Hundreds in Kokomo expected to take Delphi buyout

Early estimates indicate Delphi Corp.’s Kokomo operations could lose up to a quarter of its hourly work force to retirement or early retirement through a new buyout program.

Craig Dunn, a financial consultant with Kokomo’s Liberty Financial Group, said Friday the buyouts’ effect will be painful to Kokomo in the short term, but could be beneficial in the long run.

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.

Up to 5,000 Delphi workers can “flow back” to GM under the plan.

One benefit of mass retirements for GM and Delphi will be to greatly reduce the number of workers in their respective jobs bank programs — through which workers continue to receive most of their pay and benefits after a facility is closed or idled.

George Anthony, shop chairman of Kokomo’s UAW Local 292, said Kokomo’s Delphi operations do not have any workers in the jobs bank.

GM spun off Delphi in 1999.

Troy, Mich.-based Delphi filed for Chapter 11 reorganization bankruptcy Oct. 8, citing globally uncompetitive costs.

Delphi, the nation’s largest auto supplier, has about 185,000 employees in six divisions worldwide.

Kokomo is world divisional headquarters of Delphi Electronics & Safety and home to about 5,200 of the division’s 29,900 employees.

Workers mulling options

Anthony said 784 local Delphi workers would be eligible for retirement, either by right of having 30 years of service, or with 27, 28 or 29 years of service, qualifying them for early retirement.

He said another 200 to 250 workers should fall into three other early retirement-eligible categories.

Early indications suggest that up to half of the 1,000 to 1,100 local employees eligible might accept retirement or early retirement, Anthony said.

If Anthony’s prediction proves correct, and a federal bankruptcy judge approves the agreement April 7, Delphi could see up to a quarter of its local hourly work force retire.

Dunn said local Delphi workers will be weighing the options of a buyout against the prospects of an uncertain future.

“I think you may see higher than a 50 percent number take it,” he said.

After the adrenaline

Dunn said the immediate effect of the buyouts will be like “a shot of adrenaline” for local workers and that “a lot of that money gets spent.”

However, Dunn said eventually the workers who are used to earning $70,000 to $75,000 a year will gradually have to gear down their spending.

“If they retire earlier than they originally had planned to, they will go through a process of adjusting their expenditures to the reality facing them,” he said. “My guess is you’re going to see extra houses come on the market.”

Dunn said local businesses like restaurants have already seen the effects of uncertainty about Delphi’s future.

“Some of it is guys wondering ‘will we go on strike?’” he said.

But in the long run, Kokomo will benefit if Delphi and GM emerge as stronger companies with a more competitive cost structure, Dunn said.

He said GM’s buyout-related expenses should prove manageable.

“The fact of the matter is if you lose $8 billion to $10 billion a year, that is not sustainable,” Dunn said. “You’ve got to keep GM healthy. They’re the linchpin of the whole deal.”

Uncertainty remains

It is uncertain how many local workers Delphi would hire to replace those who take the buyout, or at what wage the new workers would be hired.

Delphi corporate affairs manager Lindsey Williams said Thursday any speculation on how the company would deal with so many retirements in Kokomo would be premature.

“The timing of the [retirement] applications, the timing of the retirements, the release dates and the sign-up dates will all be done jointly by Delphi and the unions,” Williams said. “What we do not anticipate is having a huge exodus. It will be strategic in nature, as far as the timing.”

The tentative agreement would give both GM and Delphi the right to use temporary employees to fill in the gaps left by retirement, The Detroit News reported Thursday.

Dunn said Wednesday’s agreement was the “first building block in a developing process” of negotiations.

Delphi has said it will file in court to throw out its collective bargaining agreements and terminate its retiree liabilities March 31 if a comprehensive agreement isn’t reached by March 30.

However, Delphi has already pushed back the date to file these motions several times. Dunn said he thinks Delphi will extend the deadline again if discussions remain constructive.

“There’s no reason it can’t be extended even further than it is right now,” Dunn said. “It’s in everybody’s interest to work out the details.”