UAW Local 292 in Kokomo expects Delphi restructuring

One major bank still expects Delphi, General Motors Corp. and the UAW to reach a cost-reduction agreement before Oct. 17 - Delphi's self-imposed deadline for declaring bankruptcy.

In a letter obtained by the Tribune, Local 292 lists unprecedented concessions proposals from Delphi to the UAW, including slashing production wages to $10 to $12 an hour and skilled trades wages to $19 an hour.

"The magniture of these changes would result in a wage and benefit package of $16 to $18," the letter states. "With that package, the UAW member would not be able to afford a vehicle that our products are assembled into."

Delphi officials have been in negotiations with the United Auto Workers and General Motors Corp., but no agreement has been reached to aid the Troy, Mich.-based supplier as of Thursday evening.

Delphi stock dove 12 percent Thursday to close at $2.20 on the New York Stock Exchange.

Analysts weigh in

JPMorgan analysts addressed contents of the union letter Thursday evening.

"Overall, we interpret the letter to mean that at least portions of the UAW have resigned themselves to major concessions, recognizing that bankruptcy is of greater risk to members than a negotiated settlement, but it also suggests that GM is taking a hardline stance with both [Delphi] and the UAW," the analysts wrote.

"As such, we expect negotiations to go down to the wire, but we still believe an out-of-court restructuring is most likely."

Delphi, the world's largest auto supplier, employs about 185,000 worldwide.

It has about 24,000 UAW members, including about 19,500 with seniority prior to Delphi's 1999 split from GM, according to the letter.

Kokomo is the world divisional headquarters of Delphi Electronics & Safety, employing about 5,500 of the division's 29,900 workers.

Workers say morale on decline

Many local Delphi Electronics & Safety employees are upset by the amount of money Delphi executives make. Company spokeswoman Claudia Baucus previously said Delphi's executive salaries are in line with other Fortune 500 companies.

UAW Local 292 officials could not be reached. Baucus declined to comment on the letter.

Tom Anderson, a local Delphi model maker, said "everyone is kind of stunned" by the letter. Although he remains hopeful an agreement can be reached, he said morale has declined.

"It's been getting worse here in the past week," he said. "Everybody is down and out over it."

Steve Stafford, a local Delphi tinsmith, said employees are focusing on their work as they wait to see what happens.

"People are upset," he said. "Nobody seems to know what's going on."

The UAW letter states Delphi representatives "have clearly stated that regardless of what the U.A.W. agrees to, GM must provide billions of dollars in financial support or Delphi will be forced to file Chapter 11 bankruptcy" and that "GM has not agreed to do so at this time."

GM's board met Tuesday, but the UAW doesn't know if any decisions were made about whether to bail out Delphi, according to the letter.

New bankruptcy law

Steve Miller, Delphi's CEO, has threatened to take Delphi into a Chapter 11 bankruptcy if a deal isn't reached to lower what he considers a globally uncompetitive cost structure.

He has repeatedly mentioned Oct. 17 as an important date for Delphi.

Nicholas L. Georgakopoulos, a professor of law at Indiana University School of Law in Indianapolis, said drafters of the new federal bankruptcy law were focusing on bankruptcies by individuals.

The new law makes it harder for individuals -- especially those above the median income -- to walk away from debts, he said.

"There was a fear that is partially true that there was abuse of the bankruptcy system," he said.

Despite the emphasis on personal bankruptcy, many corporations are apprehensive about how the new law, which is hundreds of pages, will affect corporate filings, Georgakopoulos said.

"Not many people have had the chance to go through it in great detail," he said. "That is probably why corporations are worried."

While visiting Kokomo recently, Miller said the current law had been tested in court for decades, but the new law represents "uncharted waters," in which competing recovery plans could bog down the process.

©2005 The Kokomo Tribune.