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McTevia: What To Expect When Delphi Goes To Court

TURMOIL IN THE AUTOMOTIVE INDUSTRY: UAW won't vote on offer
Move may lead to strike preparation
March 30, 2006

BY JASON ROBERSON
FREE PRESS BUSINESS WRITER



Delphi Corp. could move to cancel union contracts Friday, which might eventually trigger a strike. The auto supplier's largest union said it will not vote on Delphi's latest cost-cutting proposal.
The UAW said on its Web site Wednesday it expects Delphi to file a motion at 9:30 a.m. Friday in bankruptcy court in New York that would cancel union contracts and eliminate retiree medical and life insurance benefits, a motion that likely will lead its 33,000 U.S. hourly workers to prepare for a strike.
UAW spokesman Paul Krell said Delphi's proposal to cut wages by 35% with reduced benefits in exchange for a $50,000 payment is not acceptable.
A Delphi spokesman said the two sides are still talking.
"We're in discussions with the UAW and we will continue those discussions in hopes of reaching an agreement," Delphi spokesman Lindsey Williams said.
The UAW is offering members $200 for a full week on strike and $40 per day if less than a full week, according to a posting on the Web site of UAW Local 699 of Saginaw. Special strike health insurance starts the moment Delphi discontinues the insurance. To take part in the UAW's $900-million strike fund, workers must participate in local strike activities.
A strike would not happen immediately -- it will take several weeks for bankruptcy judge Robert D. Drain to consider Delphi's motion and he likely will push both sides to reach an agreement.
A strike would reverberate throughout the auto industry, crippling General Motors Corp. -- the world's largest automaker that employs nearly 80,000 Michigan workers and 142,000 people in the United States -- and diminishing the $85 billion GM spends annually on parts and services from more than 3,000 other suppliers.
Since Delphi CEO Steve Miller, 64, joined Delphi on July 1, he has pushed for GM and the UAW to help realign Delphi's business through reducing labor costs. Since a deal was not reached, Miller has followed through on threats to file for bankruptcy. He could follow through on his latest threat in filing a motion to cancel labor contracts, thereby giving him ultimate power to pay workers whatever he wants.
A Delphi strike would be devastating to GM, its largest customer and former owner. GM can try to cushion the impact of a Delphi strike by stockpiling automotive parts and new vehicles. It also has tried to diversify its business away from Delphi. But a strike would quickly cause GM to stop production at auto assembly plants across North America due to a lack of parts. During the first 60 days of a strike, GM would burn through $7 billion to $8 billion of cash, analyst John Murphy of Merrill Lynch said in a report to clients on Wednesday.
"GM ... would bleed enormous amounts of cash," Murphy said.
'Cooler heads should prevail'
Though the UAW has not committed itself to a strike, Delphi's second largest union, the International Union of Electrical Workers, already has voted to a strike if Miller nullifies contracts.
Workers could engage in wildcat strikes, an illegal spontaneous walkout that usually occurs without the blessing of official union leaders.
"Cooler heads should prevail," said Robert Chiaravalli, a labor lawyer and principal at Strategic Labor and Human Resources LLC in West Bloomfield. Chiaravalli has worked for the UAW and has served on the National Labor Relations Board.
Healthy tension is good for negotiations because it gives companies and unions something to move toward, Chiaravalli said. "But oftentimes what happens is there's not enough thought given to those deadlines," Chiaravalli said.
The problem with companies setting deadlines to reach an agreement is if they go beyond their deadline, the value of their final offer diminishes in the minds of rank-and-file workers, Chiaravalli said.
Hearing is set for May
A hearing is set for May 9 and 10 in a bankruptcy court for the Southern District of New York, if Miller files the motion. In that hearing, Drain will listen to arguments from Delphi, the unions and anyone else who has been pre-approved to speak.
"You can bet your sweet life General Motors is going to be there saying, 'Your honor. Don't do this,' " said Jim McTevia, a managing member of turnaround consulting firm McTevia & Associates LLC in Bingham Farms. McTevia said GM knows a damaging strike is almost certain if Delphi has permission to cancel contracts.
McTevia, with 40 years of bankruptcy experience, said he doubts Drain will allow Delphi to cancel contracts.
"This judge, believe me, does not want to go down in history as the judge who adjudicated the termination of the Delphi union contract and brought down General Motors," McTevia said.