AUTO INDUSTRY Strike threat looms as deadline nears

Some experts think GM won't allow Delphi to reject the union contracts.
DETROIT (AP) -- Analysts are divided on whether they expect Delphi Corp. to seek the voiding of union contracts if a labor deal isn't reached by Friday.
Delphi has twice delayed filing the request with a bankruptcy court judge to appease its unions and General Motors Corp., so some analysts predict Delphi will stick to its deadline to prove it means business.
"We believe management may now well prefer to add urgency to discussions by beginning the formal court process to terminate," JPMorgan auto analyst Himanushu Patel said Wednesday in a note to investors.
Delphi says its union contracts are not competitive and it wants its U.S. workers to agree to lower wages. But if a judge throws out the contracts and Delphi imposes lower pay, the United Auto Workers has vowed to strike. That could end up costing GM, Delphi's former parent and largest customer, billions of dollars, according to analyst estimates.
Delayed action
Delphi originally planned to ask the court to void its contracts in December, but has twice delayed that action as it talks with GM and the UAW about various solutions, such as GM-funded worker buyouts. That makes some analysts suspect Delphi won't delay the action further.
"If the parties feel they have made sufficient progress on talks, the deadline could be extended, but this could go on in perpetuity if a hard deadline is not forced," Merrill Lynch analyst John Murphy told investors in a recent note. Murphy said he believes it's increasingly likely Delphi will ask the court to void its contracts.
But others believe Delphi won't pull the trigger because of the devastating consequences.
"I don't think that GM is going to allow Delphi to reject the contracts," said Chuck Moore, director of the Detroit restructuring firm Conway MacKenzie & amp; Dunleavy.
Moore said Delphi might take other actions Friday to preserve its credibility, such as asking the court to schedule a hearing on the contracts. But asking the court to reject the contracts "puts the ball in the union's court as to whether or not to strike."
The union could strike only after the judge rejected the contracts, which could take several weeks.
Delphi spokeswoman Claudia Piccinin said Wednesday that talks with GM and UAW were progressing this week but she wouldn't comment further. Last week, UAW Vice President Richard Shoemaker said negotiators were making little progress.
Things are tense
The UAW, which represents most of Delphi's 34,000 hourly workers, has had a prickly relationship with Delphi since October, when the company filed for bankruptcy and asked the union to lower hourly workers' wages from $27 an hour to as low as $9.50. Delphi has since taken its wage proposals off the table, but union anger lingers.
But GM recently sent a signal that talks were progressing. Last month, the automaker took a pretax charge of $3.6 billion associated with Delphi and said it expects to spend between $3.6 billion and $12 billion on benefits promised to Delphi workers.
GM, which bought approximately $14 billion in parts from Delphi last year, has a great deal at stake. A Delphi strike could cost GM as much as $8 billion in the first 60 days, according to Murphy's estimates. Murphy said GM's costs are even higher than in 1998, when a 47-day strike cost the automaker $1.6 billion.
David Cole, chairman of the Center for Automotive Research in Ann Arbor, said even if Delphi asks the court to reject its contracts, he believes the three parties will work out a deal without a strike.