Workers for Delphi, a former subsidiary of General Motors, are facing 24,000 job cuts, the slashing of wages by 63%, and huge cuts in benefits such as pensions and health care.
Delphi is filing for bankruptcy, and the cuts are to go ahead despite recently awarding executives with nearly $40m in bonuses. The auto workers are beginning to fight back, defying the United Auto Workers union and attempting slowdowns in Delphi plants, including facilities in Flint, Michigan, and Kokomo, Indiana.
Rank-and-file workers, such as those in "Soldiers of Solidarity" group - www.soldiersofsolidarity.com - are holding demonstrations, and preparing for strike action. (Pictured above left are US car workers striking in 2004)
The Detroit Free Press Business section reported:
Delphi Corp. Chief Executive Steve Miller has his finger on the button that could lead to a strike that could deepen the problems of an already struggling General Motors Corp.
Miller can push that button Friday, the date U.S. Bankruptcy Court Judge Robert Drain established for Delphi to seek approval to void its labor contracts, a move sure to force union leaders to take a strike vote.
Miller has not said what he will do.
But Miller's ability to start a process of getting rid of union contracts hangs over talks among Delphi, its former owner, GM, and the UAW, Delphi's largest union.
Guessing what will happen in this high-stakes game has become something of a sport among auto analysts and industry insiders. Three things could happen Friday:
Miller files the motion and the UAW quickly takes a strike vote.
Miller delays filing the motion until sometime before March 21, a hearing date set in bankruptcy court in New York.
Miller announces that GM, its largest customer, has stepped in to offer a multimillion dollar bailout to help reduce its wages and benefits.
Miller has said Delphi might void its labor contracts if blue-collar workers don't accept significant reductions in jobs, pay and benefits.
Delphi's six unions have formed a coalition led by the UAW and threatened to strike if its contracts are nullified -- a walkout that could quickly shut down most if not all GM assembly plants in the United States, Mexico and Canada.
Richard Gedeon, a 34-year Delphi worker in Warren, Ohio, plans to strike. "We busted our asses over here giving them concessions, and what do they do? They want to close the plants down and move the work to foreign countries," Gedeon said. "This is some bull -- executives getting bonuses -- meanwhile they're cutting our wages."
To avoid a strike, GM has offered to help Delphi and unions come to terms, possibly by allowing some Delphi workers to take jobs at GM, and spend billions of dollars on buyouts, wage subsidies and other incentives for Delphi workers to accept the cost-cutting contracts.
Delphi lost $4.8 billion in 2004. After losing $741 million in the first six months of 2005 it filed for Chapter 11 bankruptcy protection on Oct. 8.
The Troy-based company says its 34,000 U.S. hourly workers make $27 an hour, which amounts to $76 an hour when benefits are added. It wants to cut 24,000 hourly jobs from its U.S. workforce and reduce the wages to an average $12.50 an hour, or $35 an hour when benefits are added.
GM Chief Financial Officer Fritz Henderson said Jan. 26 that GM will spend between $3.6 billion and $12 billion in benefit guarantees for some former workers who were moved to Delphi.
Senior credit analyst Brad Rubin of BNP Paribas in New York said GM can afford a bailout of Delphi.
Rubin estimates that, out of 24,000 UAW Delphi workers, two-thirds are close to retirement and can be bought out.
"Now to pay them off, we estimated at worse to be $1 billion to $1.2 billion," Rubin said.
For the remaining workers, Rubin estimates it would cost GM $200 million a year to keep Delphi hourly wages up near $22 an hour -- $5 an hour less than their current average, but perhaps enough to avert a strike.
If GM offers a bailout package, there is no guarantee the UAW membership will support wage concessions. A faction within the union called Soldiers of Solidarity has held protests and strike preparation meetings throughout the Midwest.
Frustration from Soldiers of Solidarity members extends beyond the proposed pay cuts. Delphi recently received approval to award executives up to $38 million in bonuses while demanding pay cuts from hourly workers. This is pushing members to defy UAW leadership by trying to slow down production at a number of Delphi plants, such as those in Flint and in Kokomo, Ind.
But the group is not the first to challenge the UAW's leadership and probably won't sway UAW's top brass, said Robert Chiaravalli, a labor lawyer and principal with Strategic Labor and Human Resources LLC in West Bloomfield.
"Several elections ago, there was a group called New Directions," Chiaravalli said. "Even when we've had turmoil in the industry where it may have caused waves among union politics, generally speaking the union has followed their leadership."
A strike at Delphi could affect not only GM but the entire auto industry. A 1998 strike at a GM parts plant cost GM $2.2 billion and shut down as many as 27 plants. GM saw its U.S. sales and market share drop.
If Miller avoids filing the motion Friday, he might save GM, Rubin said.
"I don't think he is going to push the nuclear weapon button," Rubin said.
Oct. 6: Unions say Delphi demanded as much as a 63% wage cut, to $10 an hour, and for workers to pay 27% of their health-care costs, versus 7% currently. Pensions could be halved.
Oct. 8: Delphi files for Chapter 11 bankruptcy protection, becoming the largest U.S. manufacturer ever to do so.
Oct. 11: Delphi wins approval in U.S. Bankruptcy Court for a $950-million loan to keep its U.S. plants operating while in bankruptcy.
Oct. 17: A U.S. Trustee selects Delphi's creditors committee, the group responsible for consulting, investigating and negotiating a reorganizing plan with Delphi.
Nov. 16: The UAW reveals that Delphi wants 24,000 job cuts on top of reducing wages and benefits for workers who are left.
Nov. 24: GM agrees to pay higher prices for parts it buys from Delphi.
Dec. 9: Delphi says it will pay the 12 members on its board of directors $140,000 to $200,000 a year in cash instead of stock.
Dec. 30: Delphi reveals it lost $127 million and spent $23 million on lawyers and other bankruptcy-related fees from Oct. 8, when it filed for bankruptcy, through Nov. 30.
Jan. 25: The UAW gets a nonvoting position on Delphi's creditors committee.
Jan. 31: Delphi announces it lost $1.1 billion in December.
Feb. 1: GM CEO Rick Wagoner says he is unlikely to reach an agreement by Feb. 17.
Friday: Delphi can seek bankruptcy court approval to void union contracts and cut wages and benefits drastically.