Delphi Seeks Right to Void Labor Pacts

Auto parts supplier Delphi Corp. argued Tuesday that it must be given the right to cancel its labor contracts, telling a Bankruptcy Court judge that it was crucial to the cost cutting required for its survival.

The United Auto Workers, along with six other unions representing most of Delphi’s more than 33,000 U.S. hourly workers, have threatened to strike should their contracts be tossed out. A walkout would quickly shut down Delphi and its primary customer, General Motors Corp., within days.

Although Delphi faces a potentially devastating strike, it told Judge Robert Drain that it had little choice.

“Without transforming Delphi’s North American operation to be competitive in North America, let alone globally, these debtors cannot reorganize and the corporation will fail,” Delphi attorney Jack Butler told Drain and a packed courtroom.

“Simply stated, Delphi must become competitive to survive,” Butler said.

But lawyers for the UAW argued that letting the company cancel its contracts would give Delphi an overwhelming and unfair advantage, allowing it to force through deep wage cuts and rob its workers of long-promised benefits.

“This is like a poker game where they have an ace card given to them by the court before the rest of the cards are dealt,” said Bruce Simon, an attorney for the UAW.

Drain said, “We’ll see what the evidence shows.”

The testimony is expected to last several days, and Drain is not expected to rule for weeks.

But the stakes were clear Tuesday as lawyers for the company, unions, creditors and other interested parties beseeched the judge.

Delphi has proposed cutting its workers wages from $27 to $16.50 an hour. That proposal, however, would require a large contribution from GM, Delphi’s former parent and largest customer.

But GM has not agreed to supplement Delphi workers’ wages. Without such a contribution, Delphi is prepared to pay its workers only $12.50 an hour.

The UAW has countered that wage cuts must be achieved through negotiation between the unions, GM and Delphi, and that the latter has yet to offer a concrete plan to resurrect itself.

In comments to reporters Tuesday in Detroit, GM Chief Executive Rick Wagoner said that he believed negotiations could prevail and that a strike could be avoided.

“We strongly believe there are solutions that will work for all the parties,” he said.

Giving Delphi the right to trash labor contracts would give it an unfair advantage and undermine those negotiations, the UAW says.

Union lawyers tried to highlight the damage a strike could cause as an argument against giving Delphi the right to abandon the contracts.

“Would Delphi be able to reorganize in the event of a strike?” Simon asked, questioning David Resnick, a financial advisor to Delphi called as a witness by the company.

“I think it would be very difficult,” Resnick said.

Delphi says that if Drain rules that it should not be given the power to cancel its contracts on its own, it wants the judge himself to do so.

In a preliminary ruling Tuesday, Drain said that in addition to Delphi and the UAW, creditors, shareholders and other parties would be allowed to present their own arguments in the matter before he made his decision.

The result will be closely watched by workers at GM and at Delphi, some of whom protested outside the courthouse entrance Tuesday morning.