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Delphi, GM And UAW Nearing Wages Pact


Topics:  General Motors, Delphi, UAW

Delphi, GM And UAW Nearing Wages Pact

Anthony Fontanelle
June 18, 2007

The Delphi Corp. and the General Motors Corp. are close to reaching a pact with the United Auto Workers (UAW) that would provide a cash payout to Delphi workers in lieu of reduced hourly wages, people familiar with the deal said last Wednesday.

In the said pact, the Detroit automaker is expected to fund the program. The proposal would aid in breaking a hoary blockage on wages and benefits and assist Delphi come out from bankruptcy. Talks between Delphi, GM, and the UAW were held last Wednesday. The parties hope to finish a pact in a matter of a week or so.

The proposal would offer 4,000 UAW workers a one-time lump sum cash payment in lieu of lower wages that could range from $14 to $18 an hour - similar to what newer temporary workers make. The workers are also given the chance to take a lump sum and early retirement or go back to GM. At present, the amount of the offered lump sum payment was not divulged yet.

Delphi spokesman Lindsey Williams declined to comment Wednesday on details of the talks. "We've said all along we continue to work toward a consensual resolution, and we continue to do so," he said.

GM spokeswoman Renee Rashid-Merem acknowledged that GM will have to assume some Delphi labor costs, but declined to confirm whether an offer of a lump sum in exchange for lower wage rates was on the table. She said that the talks were continuing and progress was being made. "We all remain committed to coming to an agreement that makes sense for all parties," she said.

The UAW has rejected two offers from Delphi that would mean profound pay cuts. The cash-for-lower wages proposal has some similarity to Delphi's attrition program in 2006. Over 12,000 UAW workers retired early, with those eligible getting $35,000, while 1,400 signed up for buyouts and cash payments of up to $140,000, based on seniority and other significant factors. The Detroit-based automaker subsidized the program.

In 2003, an agreement signed with the UAW allowed Delphi to employ workers at lower wages than veteran employees. The deal was a major concession, and the UAW is not eager to let go more ground. But Troy-based Delphi and its equity partners urged the UAW to accept wage cuts to make a post-bankruptcy Delphi compete with lower-cost auto suppliers.

After more than a year of negotiations, the wage pact is showing apparent development. The delays have caused Delphi to slide back the date of its emergence from bankruptcy. The proceeding has cost it about $200 million in legal, accounting and other fees.

During the regulatory filing in May, GM said that it would assume $7 billion in retirement and labor costs related to Delphi - $1 billion more than it had previously allotted. GM took a $1 billion charge against second-quarter earnings to cover the expense. The company also said that its annual labor payments for Delphi would be between $300 million and $400 million, as much as $200 million higher than previously thought.

In return, the automaker would save about $2 billion annually in parts costs. Additionally, Delphi would have a competitive wage rate, agreeable to the private-equity firms that have approved billion-worth investments in Delphi.

Some analysts said that the GM filing suggested a deal might be close for Delphi. It may indicate "that the UAW was successful at getting GM to subsidize above-market wages for an extended period," Lehman Brothers analyst Brian Lehman said in a May 24 research note.

A big wild card remained unopened. Who will end up owning Delphi? The Saturn hood scoop would allow flow of air to cool the negotiations.

Source:  Amazines.com




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