Delphi Workers Might See Wage Cuts in 2006

Delphi Corp.’s hourly workers could see wage and benefit cuts as early as spring, officials from the auto supplier, which sought bankruptcy protection last weekend, said Wednesday.

Delphi Chairman and Chief Executive Robert S. Miller said the Troy-based company plans to propose cuts to its unions Oct. 21. If an agreement isn’t reached by mid-December, Delphi will ask a bankruptcy judge to void its contracts.

Delphi attorney John Butler Jr. said that he wasn’t expecting any litigation over the contracts until the first quarter of next year.

Miller said he would work closely with the United Auto Workers union, which represents most of the company’s 30,000 U.S. hourly workers, to craft a new contract.

He said Delphi could have asked the Bankruptcy Court for emergency relief from its labor contracts but didn’t.

Miller said that he understood workers were angry but that the company was paying hourly workers two to three times more than its competitors. Delphi’s autoworkers are paid $27 an hour, and their total wage and benefit packages are worth about $65 an hour. Delphi has proposed cutting that by about 60%.

“I do not blame these people. They are being hurt. Their expectations are being dashed,” Miller said. “Globalization has swept over them, and they are extremely angry.”

In a memo sent this week, UAW Local 686 in Lockport, N.Y., told Delphi workers to prepare for a strike. It was one of the first indications that unions could be planning to disrupt Delphi’s operations.

Miller said the best thing workers could do for their own financial security was to stay on the job.

“I believe the UAW has competent, adult, honest leadership,” Miller said. “They understand the situation, fundamentally understand that absolutely nothing can be gained by a strike at any Delphi facility other than to hasten and expand the number of plants that might have to close and further jeopardize any chance for salvaging and restoring our pension plan.”

Miller also fiercely defended his decision to boost a severance package for 21 of Delphi’s top executives Friday, the day before Delphi filed for bankruptcy protection. Under the new agreement, executives will be eligible for 18 months of pay if Delphi lays them off. Previously severance packages were capped at 12 months. In exchange, executives signed agreements promising not to work for competitors for the 18-month period.

Miller said the industry average for a severance package is 24 months and Delphi wants to keep its executives because looking for new ones would be disruptive. He added that Delphi’s executives hadn’t received bonuses in three of the last four years and their stock and stock options had lost value.

“There is no question they could get better compensation elsewhere, and I know for a fact the headhunters are swarming,” Miller said.

Miller isn’t eligible for the package, and he said he might cut his own $1.5-million base salary as the company’s restructuring proceeds.