Workers enter Delphi Corp.'s operations in Flint, Mich. They are among the workers who must decide to take a wage cut.
JEFF KOWALSKY / BLOOMBERG NEWS Enlarge
DETROIT - Struggling auto parts maker Delphi Corp. reached a tentative wage-cutting deal yesterday with its largest union in what may set the pattern for pay in the U.S. automotive parts industry.
The deal, which must be voted on by Delphi members of the United Auto Workers, was signed just before UAW leaders and union local presidents met.
Delphi has about 6,000 Ohio workers.
Details were not released, but Delphi said in a statement it's a "significant milestone" in its quest to emerge from Chapter 11 bankruptcy protection.
The bankrupt firm's holdings include a factory in Adrian and one in Sandusky. Union officials representing 1,250 workers at the plants could not be reached for comment. The factories are among 21 nationwide Delphi wants to sell or close by 2008.
The pact also is a requirement for Delphi to get up to $3.4 billion from private equity investors it needs to escape from Chapter 11. The supplier lost $533 million in the first quarter and $5.5 billion in 2006.
Union officials said the pact would cut wages for longtime UAW workers from around $27 per hour to between $14 and $18.50.
The pact, if approved, would end a strike threat that could have halted production at General Motors Corp., Delphi's largest customer. It also would end two years of talks in which the UAW threatened a strike.
Troy-based Delphi said it needed lower wages to compete in a global economy. GM's former parts arm, which was spun off as a separate firm in 1999, filed for bankruptcy protection in October, 2005, and asked for court permission to void its labor contracts. A U.S. Bankruptcy Court judge must also approve the deal, Delphi's statement said.
GM is on the hook for an estimated $7 billion in liabilities for Delphi pension and retiree health-care expenses.
The deal will have a much larger impact than that, David Cole of the Center for Automotive Research in Ann Arbor, said before the deal was announced.
"It's a pattern supplier agreement," said Mr. Cole, who added that supplier sales of many factories and even Ford Motor Co. have been delayed while Delphi negotiations dragged on. "Nobody's going to pick up any of these assets unless they have an agreement that they think is going to be competitive over the longer term," he said.
It appears the union was able to keep far more than the $9 an hour that Delphi proposed earlier, said Harley Shaiken of University of California-Berkeley.
"The $18 wage is approximately double what Delphi offered immediately after the bankruptcy. So they managed to salvage a much better agreement," he said.
UAW officials told local leaders Tuesday that they hope to wrap up the Delphi issue before July 23, the start of national contract talks between GM, Ford, Chrysler Group, and the UAW. Voting likely would end before July 1, when GM plants start a two-week shutdown.
UAW leadership must sell the deal to its 17,000 Delphi members. About 4,000 of them are paid the higher wages. Other unions represent Delphi's 20,000 hourly workers, who likely will get the same deal.
Delphi has said it wants to close or sell most of its 29 U.S. plants, including 6 of 10 Ohio plants.