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Fate of area plants uncertain Proposals could lead to smaller work forces

The face of the Western New York automotive industry could change significantly as a result of buyout plans announced Wednesday by General Motors and Delphi Corp., but the fates of the region's two biggest plants are far from certain.

Depending on how many local workers accept the offers, the plans could lead to smaller work forces at GM's Town of Tonawanda engine plant and Delphi's Lockport Thermal & Interior plant.

The companies are trying to become leaner, more efficient operations, better equipped to compete with foreign manufacturers on costs. The engine plant has received high marks in an annual industry survey, continues to win new engine lines and appears on solid footing. But Delphi's Lockport plant has struggled, raising questions about its future as the company restructures.

And Delphi, now operating in bankruptcy, still faces wrenching negotiations over a plan to slash wages by 60 percent. The company has threatened to close plants, although some analysts say it would be difficult for the company to outsource or move the Lockport operations.

Under an agreement with the United Auto Workers, GM will offer buyouts to up to 100,000 of its hourly workers. As many as 5,000 hourly workers at Delphi will be eligible to return to GM, and about 13,000 others will be eligible for a lump-sum payment of $35,000 to retire.

With their high pay and large work forces, Delphi and GM are two of the most significant employers in the region. Delphi has about 3,800 employees in Lockport, including 3,000 hourly workers. GM has about 2,500 employees in the Town of Tonawanda, including 2,200 hourly workers.

George Palumbo, a Canisius College economist, said the Tonawanda engine plant's high productivity marks could help it maintain the bulk of its work force, even as GM downsizes.

"You sure don't want to lose people if you're the second most-productive plant of its kind in the country," he said. "It's highly successful and highly productive. Messing with it could jeopardize that."

The buyout plans are part of an effort to avert a strike at Delphi. Delphi has warned that if it does not reach an agreement with its unions by March 30, it could ask a bankruptcy court to void its contracts. If the auto parts supplier takes that step, the UAW has threatened to go on strike at Delphi.

Patrick Heraty, a professor of business administration at Hilbert College in Hamburg, said the March 30 deadline probably helped generate agreement on the buyout offers. He said he believes the plans have a chance to succeed.

"It's a breakthrough," he said. "It's only a beginning, but it is a breakthrough."

Peter Masich, president of UAW Local 774, which represents workers at the GM Tonawanda plant, was optimistic about the proposal. But he emphasized that nothing has been settled, and won't be until Delphi presents a plan in court. That is expected to happen April 7.

"Nothing's official," Masich said. "Everything's tentative right now."

However, Masich said, "This'll clear up some of the dust so we can see down the road. . . . It's going to make a more palatable negotiation. Right now, I look at it as a positive. It gives an opportunity for people at Delphi and GM to look at some options."

The incentive plans are a product of three-way talks between GM, Delphi and the UAW aimed at reducing costs. Delphi, which was spun off from GM in 1999, filed for Chapter 11 bankruptcy protection last October. Though Delphi is independent, the buyout offers reflect the historical ties that remain between Delphi and GM.

Those three-way negotiations are continuing, and the outcome is expected to be crucial to the auto industry's future in the region.

Nallan Suresh of the University at Buffalo's School of Management said he was surprised by the sweeping scope of GM's offer. He called it "the first step in the right direction."

"What we're seeing is the beginning of many, many changes yet to come," said Suresh, professor and chair of Operations Management and Strategy.

Beyond reducing their costs, he said, employers such as GM and Delphi need to "rethink their manufacturing processes" in the long run. The fact that the companies will have smaller work forces, he added, will force them to go in that direction.

For Delphi workers, the buyout plans announced Wednesday create a path for some of them to "flow back" to GM, as Delphi wrestles with an uncertain future.

As many as 5,000 Delphi workers could go back to GM. "That would definitely help Delphi in a big way," Suresh said.

Suresh noted that Delphi didn't start out like a typical new company when it was spun off in 1999. It began with an older work force, and a higher cost structure than start-ups, he said.

"It doesn't have the entrepreneurial culture of a new company," he said.

Delphi is pressing for a reduced wage and benefits structure from its workers, something the company says it must have to survive and compete.

"It's probably not enough at this point, as far as Delphi is concerned," Heraty said of the plans unveiled Wednesday. "They will probably be looking for more."

Lindsey Williams, a Delphi spokesman, said the company is working on an agreement to reduce costs, and that the buyout offers don't represent the end of that process.

"This is a very important element of an overall and comprehensive plan" for the company to emerge from bankruptcy, Williams said.

News staff reporters David Robinson and Maki Becker contributed to this report.

e-mail: mglynn@buffnews.com

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