Pay, benefit cuts are main goal, CEO says

Two Valley plants show 'all is not lost for America,' Delphi's boss said.
By DON SHILLING
VINDICATOR BUSINESS EDITOR
Delphi Corp. hopes to begin cutting the pay of hourly workers next spring.
Delphi will present its wage-and-benefit proposal to its unions Oct. 21, Robert "Steve" Miller, chief executive of the troubled auto parts supplier, said at a news conference Wednesday in Detroit.
The company intends to bargain with its unions throughout the rest of this year, even though it could seek emergency approval through bankruptcy court to void contracts, he said. If those talks fail, Delphi has asked for a court hearing Jan. 17 to void union contracts.
Delphi, which filed for bankruptcy court protection Saturday, wants workers' pay and benefits to be reduced by the second quarter of next year, Miller said.
Cutting pay and benefits of hourly workers is a main goal of the bankruptcy, he repeatedly said. The market sets the value of labor, and Delphi's $27-an-hour pay rate is double or triple what other suppliers are paying for production work, he said.
"No one can survive doing this," he said.
While Delphi is overpaying production workers, it is underpaying its executives, he said. The court has approved beefed-up severance plans for 21 top executives, which has angered union officials. Also, Delphi has proposed incentives to keep 600 other executives with the company through the bankruptcy.
Miller said Delphi needs these executives, who are being recruited by other companies.
Like it or not, the market sets a large discrepancy between what society pays people who cut grass and people who run major companies, he said.
Local operations
In a response to a question, Miller defended the company's decision not to use a third wage tier at its operations in the Mahoning Valley, which are part of Delphi Packard Electric Systems.
Officials of Local 717 of the International Union of Electrical Workers, which represents 3,800 area workers, said this week the company could save money by hiring workers at this lower-wage tier and bring back work that is now being done at Packard's Mexican plants.
As it stands now, Packard is paying workers in Mexico and is paying area workers who have nothing to do.
Packard's local operations have about 300 people in what's called the jobs bank, which means they report to work and get paid even though they don't have any production duties.
Miller said, however, that Delphi needs fewer workers because it has declining orders from General Motors Corp., its largest customer. Also, technology has allowed Delphi plants to become more productive and reduce staffing, he said.
Miller reiterated that Delphi just can't afford the pay rates that it assumed when the company was spun off from GM in 1999. The spinoff deal called for GM to accept Delphi workers who weren't needed, but GM doesn't have enough demand to accept them, he said.
Delphi is paying $100 million each quarter in pay and benefits for 4,000 workers who aren't needed, he said.
He commented, however, that Packard's plastic-molding plants in Vienna and Cortland are modern plants that show "all is not lost for America."
There are many automotive components that will continue to be made in the United States near auto assembly plants, he said.
Not at full employment
Packard has invested $100 million at the Vienna and Cortland plants to install high-tech production machines that produce billions of plastic parts annually. At full production, however, those plants employ only 240 of Packard's 3,800 local hourly workers.
Ann Cornell Vickers, a Packard spokeswoman, said the two plants are not at full employment now, although she didn't know how many of their workers are in the jobs bank.
The only part of Packard's local operations that are running at full capacity are its cable-making operations on North River Road in Warren, she said. The vast majority of Packard's hourly workers are at this complex, which includes plants that stamp metal parts and make ignition parts, sensors and electrical centers.
Miller said Delphi is taking four months to determine which plants it doesn't need. For some time, however, Delphi has had a separate business group for troubled plants that it wants to close, fix or sell.
Delphi officials said that group includes 11 plants but none of them are Packard plants.
David Cole, director of the Center for Automotive Research in Michigan, said Packard appears to be less of a problem than some of Delphi's other divisions. Packard has been aggressive over the years in cutting its labor costs by sending work to Mexico, he said.
Over the past 30 years, Packard has trimmed its hourly workforce in the Mahoning Valley by 10,000.
In other areas
In the Dayton area, however, government officials are concerned they will bear the brunt of Delphi cuts. A top Montgomery County official predicted that Delphi eventually will close five Dayton-area plants, putting 5,700 employees out of work.
Also, Miller said that Delphi-Harrison Thermal Systems, which has 6,500 employees in the Buffalo, N.Y., area, makes components that will be difficult to continue in the United States. Plants in that area make components, radiators and other heating and cooling parts.
Delphi has 45 manufacturing sites in the United States and Canada that employ 49,000. The company has 33,000 unionized workers and 12,000 retirees.
Pension plan shortfall
Cutting pay and benefit rates not only will help money-losing North American operations, but it also will help the company try to cover a $10.8 billion shortfall in its pension plans, he said. The only way to make up that shortfall is to become profitable, Miller continued.
Delphi was to make a $1 billion payment to the pension fund in January, which is one reason for the bankruptcy filing, Miller said. Now, the payment will amount to between $100 million and $200 million, he said.
The federal Pension Benefit Guaranty Corp. said it would cover $4.1 billion of the shortfall if Delphi's plan is terminated in bankruptcy court. A spokesman said the agency is waiting to see how much of the additional amount GM is responsible for.
Delphi's unions have agreements with GM for the automaker to cover pensions if Delphi cannot, but Miller said those are open to legal interpretation. It is unclear whether the agreements cover all workers, those who already are retired, those who retire by 2007, or those who are eligible to retire by certain dates, he said.
Miller said it will be at least six months before the pension question becomes clearer.
Delphi plans to reorganize by 2007 and become "a jewel of a company and a technological powerhouse," Miller said.
He added, however, that it needs supply agreements with GM, labor deals and a resolution of pension problems. If those aren't worked out, Delphi could be broken into small pieces and sold, he said.
shilling@vindy.com