14 June 2007

GM-Delphi-UAW Deal Near

The Detroit News reported today that a deal may be near in the long-running GM-Delphi-UAW love triangle. Delphi is currently in Chapter 11 bankruptcy protection and has said that it needs to significantly lower its labor costs to remain a viable entity. The UAW has said that if Delphi gets a court order to void the current labor contracts, it will strike Delphi, and without Delphi parts, GM would not be able to continue production (Delphi was spun off from GM in the 1990s and is still GM’s largest parts supplier). Given GM’s precarious financial position, a Delphi strike would be disastrous, which is why GM is willing to help pay any settlement to the UAW to allow Delphi to turn the page and exit bankruptcy protection.

If the “people familiar with the talks” are correct, the general proposal likely to be agreed upon is for GM to provide a cash payment to remaining Delphi workers (20,000 or so already took voluntary packages in the past several months to leave the company). In exchange for this lump sum, the union would agree to lower hourly wages, which Delphi could presumably afford to pay going forward. The hourly rate after reduction would be somewhere between $14-18 per hour (on par with what temporary auto/parts workers earn), and workers would also be given the choice of accepting a buyout, or returning to the GM as employees.

The amount of the lump sum payments to individual employees is not clear, but GM has already reserved $7 billion for a Delphi bailout, so it will likely be a pretty significant sum per employee. Yahoo Finance shows Delphi having 171,400, but the company’s US headcount is not clear (their most recent 10K filing shows 21,300 unionized hourly workers).

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