Sunday, February 11, 2007

Labor talks slow Delphi plans

Tuesday, January 30, 2007
Labor talks slow Delphi plans
Bankrupt supplier, GM and unions likely to reach concession agreement in late Feb., well past deadline.
David Shepardson / Detroit News Washington Bureau





WASHINGTON -- An agreement on wage and benefit concessions among the United Auto Workers, General Motors Corp., Delphi Corp. and a group of investors who may pump up to $3.4 billion into bankrupt Delphi isn't likely to be completed until late February at the earliest -- weeks past the Wednesday deadline, two people involved in the negotiations said Monday.

These people downplayed a report published Friday that said Cerberus Capital Management LP and its partners might drop their investment in Delphi because the UAW is resisting proposals for sharp pay cuts.

They told the News that discussions about the many complicated issues were progressing and would go on for weeks.

"We are continuing negotiations," one person close to the talks said Monday. "We're a long way from threats."

There are several negotiating sessions scheduled for later this week between UAW officials and hedge fund Cerberus, including the head of the fund's automotive unit, David Thursfield, a former Ford Motor Co. executive.

Under a plan approved in U.S. Bankruptcy Court earlier this month, an investment group led by Cerberus and Appaloosa Management LP has the right to buy shares in a restructured Delphi for up to $3.4 billion and could own up to 72 percent of the recapitalized company. It would also get six seats on Delphi's 12-member board of directors. But the equity funds have a right to withdraw after Wednesday if no deal is reached on union concessions.

Other investors include Harbinger Capital Partners Master Fund I, Merrill Lynch & Co. and UBS Securities LLC.

Negotiations continue

Delphi, which filed for bankruptcy protection in October 2005, wants to close 21 of its 29 U.S. plants while shedding 20,000 hourly jobs and thousands of salaried jobs.

It hopes to emerge from bankruptcy in the second quarter of this year with renegotiated labor agreements that sharply reduce its labor costs, especially for those remaining workers who are still being paid higher wages.

Delphi has replaced many workers who took buyouts or early retirement offers with lower-paid new hires.

Delphi spokeswoman Claudia Piccinin said Monday that talks were continuing between Delphi, GM and its unions.

"We're going to continue to negotiate until a consensual agreement is reached," she said.

Earlier this month, Delphi's executive chairman, Robert S. "Steve" Miller, said he was hopeful a deal would be reached.

"This is a labor transformation case, first and foremost," Miller said at a Jan. 11 court hearing. Delphi could end up in a "maelstrom" if it hasn't reached a union deal before the UAW begins contract talks this summer with Detroit automakers, he said.

Under the Cerberus deal, GM would receive 7 million shares of common stock in the reorganized Delphi, $2.63 billion in cash and an unconditional release of alleged Delphi claims against GM. That money would help defray GM's costs connected to Delphi's bankruptcy, which GM estimates range between $6 billion and $7.5 billion.

Wagoner is hopeful

Earlier this month GM CEO Rick Wagoner said he was hopeful a deal would be reached soon. "We can envision potential for a solution in the relatively near term," Wagoner said. "I would hope that next year ... we can talk about how it was done relatively early in '07."

A Delphi bankruptcy court hearing is set for Feb. 15. The agenda has not been finalized.

To get approval for its restructuring plan and eventually emerge from bankruptcy, Delphi must reach final agreements with its unions over future labor costs and the right to close plants, as well as reach agreement with GM over outstanding business issues, Miller said. To get those agreements, it needs a viable financing plan that GM and the unions support, he said.

Appaloosa already is Delphi's largest stockholder, with 9.3 percent of shares worth about $200 million. Appaloosa also owns a large chunk of Delphi bonds.

Cerberus and Appaloosa can withdraw if no deal is reached with the UAW by Jan. 31, but they have no plans to do so as long as they are making progress, people close to the talks said Monday.

You can reach David Shepardson at (202) 662-8735 or dshepardson@detnews.com.












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