After months of tough talk, Delphi Corp. stood by its words yesterday, saying it would slash thousand of jobs, close or sell two-thirds of its U.S plants and ask a bankruptcy court judge for permission to throw out its union contracts.
The judge has scheduled a hearing on the petition May 9 and no action is expected before then.
The move by the nation's largest auto parts supplier raised the stakes in a five-month-old conflict that could have a far reaching impact on the company, its 33,000 workers, its unions and the U.S. auto industry.
Accusing Delphi of misusing the bankruptcy court process, the United Auto Workers promptly warned that a "long strike" would take place if Delphi sought to impose its latest offer. The union also said there is "no basis for continuing discussions" with the company.
While some experts said Delphi's might be trying to jolt its unions into making a deal, others warned that the situation could easily backfire for all involved, including beleaguered General Motors Corp., which could end up in bankruptcy court itself if Delphi workers strike.
Delphi is GM's largest supplier, and there are deep financial ties between the two companies. "This is the first pitch in the game of hard ball and I think the union is both angered and not by any means intimidated," said Harley Shaiken, a labor expert at the University of California at Berkeley.
Robert S. "Steve" Miller Jr., Delphi's chairman and chief executive, described yesterday's actions, in a written statement, as "necessary procedural steps" that the firm had to take while continuing to try to reach argument with its unions.
Three times before in recent months Delphi had put off the threat to go to court to set aside its labor contracts. When the company filed for bankruptcy last fall, it warned it would take such steps if it could not lower its labor costs to allow it to compete with non-union and foreign-based competitors.
One of the world's largest makers of auto parts, with over 180,000 workers in 40 countries, Delphi said last fall it needed to abandon the labor costs it inherited when it was spun off from General Motors Corp. in 1999.
The UAW answered Delphi's vow to slash workers' wages down to $10 an hour by threatening to strike. But Delphi backtracked and the two sides began bargaining. Though Delphi had upped its offer, the talks failed this week.
In detailing a "transformation" strategy, Delphi said yesterday that it would keep eight plants in the U.S. and close or sell 21 others. Under the current labor contracts, Delphi projects operating losses of as much as $8.1 billion over the next five years, depending on how many workers accept buyout packages offered last week.
Delphi said it would slash 25 percent of its global white-collar work force or a cutback of 8,500 workers. About 5,200 of them are employed in the U.S.
Furthermore, the company said it would freeze the defined benefit pension plans for hourly and salaried workers and provide them with defined contribution plans.
Delphi is also asking the bankruptcy court to reject unprofitable contracts with GM that cover about half of Delphi's North American purchase volume revenue from GM.
GM said it was disappointed by Delphi's decision to drop a number of its contracts with the carmaker, and added that it would continue to work with Delphi and the unions to reach a deal.
GM expected Delphi to "honor its commitments" to avoid any disruptions of GM's operations, a spokesman said.
Also yesterday, GM won the approval of a federal judge in Detroit to proceed with $1 billion in cuts to retirees benefits.
The cuts will require more than 475,000 retirees and their dependents to pay part of their health insurance premiums for the first time. The cost will be as much as $752 per family each year.
Stephen Franklin, Jim Mateja and Rick Popely write for the Chicago Tribune.