Delphi backs up request to reject bargaining agreements; union negotiation attempts unsuccessful

By Caroline Salls

Pittsburgh, May 1 - Delphi Corp. said modifications to its collective bargaining agreements are essential to its successful reorganization, despite union contentions to the contrary, as attempts at union negotiations since March 31 have been unsuccessful, according to a Monday filing with the U.S. Bankruptcy Court for the Southern District of New York.

In its memorandum in support of its motion to reject its collective bargaining agreements, Delphi also said the unions' argument that the company has enough liquidity to wait to see whether it can reprice its contracts with General Motors Corp. is not true based on the company's assertion that it will record an operating loss of more than $2 billion this year alone.

The company said the unions are correct in saying that the full effect of Delphi's proposed employee buyout program will not be clear until it knows the participation rate under the program, but even if Delphi could negotiate the buyout program with all unions and 100% of employees elect to participate, it would not eliminate the need for labor contract modifications.

In addition, the company said any potential effects of its motion to reject some GM contracts will also not eliminate its need for the proposed financial restructuring of collective bargaining agreements.

"The bottom line is that every day that resolution of labor contracts is delayed, the value of the estate is diminished, meaning that other constituencies are effectively being required to fund the unions' uncompetitive collective bargaining agreements," the company said.

Delphi said it agrees with the unions' contentions that there has not been enough bargaining on its collective bargaining agreements, but said it is through no fault of Delphi's, as the unions have rejected the company's attempts to bargain and has threatened to strike if the company seeks to reject the agreements.

CBA rejection request

As previously reported, Delphi requested court approval to reject its collective bargaining agreements and its unprofitable General Motors Corp. supply contracts as part of its strategy to prepare for its return to stable, profitable business operations and to complete its Chapter 11 restructuring in the first half of 2007.

UAW executives said rejection of its collective bargaining agreement would prompt a long strike.

Delphi said the company will focus on five key areas, including modifying its labor agreements to create a competitive arena in which to conduct business going forward, concluding negotiations with GM to finalize its financial support for Delphi's legacy and labor costs, streamlining its product portfolio to capitalize on technology and market strengths and making the necessary manufacturing alignment with its new focus.

The company plans to focus on transforming its salaried workforce to ensure its organizational and cost structure is competitive and aligned with its product portfolio and manufacturing footprint and devising a workable solution to its current pension situation, whether it is to stretch out pension payments or develop an alternate solution.

A hearing on the collective bargaining agreement motion is scheduled for May 9 and May 10.

In addition, Delphi said it needs GM to cover a greater portion of the costs of manufacturing products for GM at plants that bear the burden of legacy costs.

The initial GM contract rejection motion covers less than 10% of GM's contracts as of Jan. 20 and about half of the North American annual purchase volume revenue from GM.

Delphi said it expects this motion to be heard at its May 12 omnibus hearing, also allowing for continued negotiations between Delphi and GM.

Delphi, a Troy, Mich.-based automotive electronics manufacturer, filed for bankruptcy on Oct. 8, 2005. Its Chapter 11 case number is 05-44481.

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