Friday, July 13, 2007

Union's stake in Delphi fading

Saturday, July 07, 2007
Union's stake in Delphi fading
By 2012, parts supplier expects to have one tenth of the UAW employees it entered bankruptcy with.
David Shepardson / The Detroit News

WASHINGTON -- Delphi Corp. expects to have as few as 2,300 United Auto Workers members working in four remaining plants by 2012, the company said in a court filing this week.

The estimates give the clearest picture yet of just how dramatically the giant Troy-based auto supplier is shrinking in the United States.

When Delphi filed for Chapter 11 in October 2005, it employed more than 24,000 UAW workers, including about 10,000 in Michigan. Only Detroit's Big Three Automakers employed more.

Delphi's UAW membership has since dropped to about 17,000 due to buyouts and early retirement programs.

By the end of 2007, the supplier will have 4,703 UAW employees, Delphi said. That will fall to between 3,101 and 3,604 by 2011, depending on new business added at the four UAW plants that Delphi intends to keep open in Kokomo, Ind.; Lockport, N.Y.; Rochester, N.Y.; and Grand Rapids. Total UAW employment could drop to as low as 2,306 in 2012.

Of those plants, Grand Rapids is expected to slightly increase employment -- from 535 workers in 2007 to about 543 in 2011, according to charts attached to the recently ratified UAW-Delphi contract, which was part of a 996-page document that Delphi filed in New York bankruptcy court this week.

Despite the cuts, Wall Street was counting on downsizing to be even deeper. CRT Capital Group LLC auto analyst Kirk Ludtke said the 2011 UAW staffing levels "are higher than the preliminary estimate (of about 1,600 UAW workers) we made late last week."

But Ludtke concluded in a research note Friday the contract that Delphi reached with the UAW will allow the company to reduce its work force "to a level at which Delphi should be able to reach its long-term potential." He rates Delphi stock a "buy."

Delphi spokesman Lindsey Williams noted that the company earlier had announced its intention to exit 21 of 29 core businesses. As a result "you're going to be a smaller business," Williams said.

Of 21 UAW plants, Delphi will continue to operate four, sell seven to other parties and close 10. Some employees will be eligible for $105,000 buy-down payments over three years, and others may get relocation allowances of up to $67,000 when plants close.

About 12,400 UAW-represented Delphi workers opted to retire by Jan. 1, 2007, while 1,400 took buyouts.

Delphi and the UAW reached a contract last month that voting union members subsequently ratified by 68 percent. Federal bankruptcy Judge Robert Drain will decide on July 19 whether to approve the contract, which will reduce the auto supplier's labor costs and help it emerge from bankruptcy this year.

Delphi has withdrawn motions asking Judge Drain to void its collective bargaining agreements and allow it to unilaterally reduce the benefits of certain UAW retirees.

Delphi hopes to reach agreements with its five other smaller unions by Aug. 16, the date of another court hearing. It is in "active bargaining" with its second- and third-largest unions -- the International Union of Electronic, Electrical, Salaried, Machine and Furniture Workers and the United Steelworkers.

The court also must still approve a financing plan. A group of investors led by Appaloosa Management LP wants to invest up to $3.4 billion for 70 percent of Delphi ownership.

It's not clear if a rival bid will emerge. Dallas-based private equity firm Highland Capital Management LP renewed its interest in Delphi after the court rejected its first bid earlier this year. Other investors also could add to Appaloosa's bid. Pardus Capital Management, which had previously teamed with Highland for a bid, has joined the Appaloosa group.

Earlier this year, Cerberus Capital Management LP, which is buying DaimlerChrysler AG's Chrysler Group, withdrew from the Delphi bidding.

You can reach David Shepardson at (202) 662-8735 or

© Copyright 2007 The Detroit News. All rights reserved.


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