Delphi officer faces lawyers' questioning

The IUE's chief negotiator said GM's involvement is a significant development.
By WILLIAM K. ALCORN
VINDICATOR STAFF WRITER
NEW YORK -- An attorney for the International Union of Electrical Workers, which represents about 8,000 of Delphi Corp.'s 33,000 U.S. hourly workers, argued in federal bankruptcy court Wednesday that each facility should be considered separately for wage and benefit concessions.
Delphi's electrical and electronics safety division showed a profit in 2005, and Delphi Packard Electric in Warren is a part of that division. Yet its hourly employees are still being asked to accept huge wage and benefits concessions.
During cross examination of John D. Sheehan, Delphi's chief restructuring officer, IUE lawyer Thomas Kennedy said that $32 million in profits were realized on $222 million of operating income last year.
Kennedy then argued that because Delphi Packard was profitable under existing contract and work rules, concessions are not needed in that division.
Kennedy pointed out to Sheehan that the Warren facility received an international productivity award and changed work rules to benefit and help the company.
"Does it make sense to offer those workers the same as the rest? What incentive does that give them?" he asked Sheehan.
Response
Sheehan said while the company recognizes and appreciated the Warren workers' actions, a wage and benefits package that is in line with the company's competitors is necessary companywide if the firm is to survive.
"Delphi Packard is only one piece. The entire company needs to be profitable," Sheehan said.
Delphi Corp., in its bankruptcy petition filed in October 2005, proposed cutting its U.S. hourly workers' wages from $27 an hour to $16.50 an hour, or as low as $12.50 an hour if General Motors doesn't agree to supplement those wages. Delphi also asked the court for permission to terminate its labor contracts.
During nearly eight hours of cross examination Wednesday, Sheehan, the only witness called, was questioned on a variety of issues by lawyers from several unions that represent Delphi employees and the company's creditors.
Among them was the United Autoworkers' Bruce Simon. The UAW represents about 24,000 of Delphi's U.S. employees. Several more Delphi executives are scheduled to testify before union representatives, including Henry Reichard, the IUE's chief bargainer, and Donald Arbogast, Local 717's shop chairman, take the stand. Local 717 represents about 3,800 workers at Delphi Packard in Warren.
The hearing is scheduled to resume at 9 a.m. Friday, and again June 2 and 5, with the possibility of a session Tuesday, union officials said.
Negotiating
Earlier this week, GM sent a letter to Bankruptcy Judge Robert Drain, asking that the hearing be adjourned so that Delphi and its unions could focus on negotiating a settlement. In its letter, GM said the hearing is putting undue pressure on the situation, thereby chilling negotiations.
Simon said the notion that the union would negotiate and litigate at the same time is "ludicrous."
Judge Drain said it is his policy to grant requests for adjournment when both parties want it. That is not the case here, he said. He urged both sides to look at the potential ramifications of litigation and continue negotiations at the same time.
In some of the toughest questioning of the day, Simon asked Sheehan if Delphi ever intends to terminate retirees' health benefits or impose the wages and benefits package proposed in its bankruptcy filing.
Sheehan said Delphi does not intend to impose the proposed compensation package. When pressed by Simon, however, Sheehan acknowledged that circumstances might dictate drastic measures at some point.
"We would have to consider how to impose the wage and benefits package without disrupting the entire auto industry," he said.
Sheehan estimated that if Delphi could not supply the parts it makes to GM, its main customer, it would be at least six months before GM could develop other sources.
Analysts have said that GM could lose up to $130 million a day during a strike.
Real situation
During a break in the hearing, Kennedy said the IUE is trying to demonstrate to the court that the financial projections developed by Delphi to justify concessions don't reflect the real situation.
"Some of the plants where our members work are making a profit," he said.
IUE officials agree that Delphi has economic problems, but do not think the company has shown it is as "hopelessly insolvent" as it says it is.
After the hearing recessed, Reichard said he considered GM's unexpected involvement a significant development that could be the catalyst for a potential consensual agreement between Delphi and the IUE. This is the first time GM has acknowledged that it needs to get involved in the situation, he said.
While Reichard believes Judge Drain wants to grant Delphi's motion to have the authority to terminate labor agreements, he also believes an agreement can be reached that won't devastate IUE'S membership. A negotiating session is scheduled for June 6.
"We are making progress in negotiations, but there are still some significant issues outstanding. If Delphi imposes something we can't live with, there will be a strike," he said.
alcorn@vindy.com