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Incentives lessen Delphi strike threat Move could help firm cut costs, experts say

The retirement incentive plans offered Wednesday to eligible General Motors and Delphi workers have reduced the threat of a strike by the United Auto Workers at Delphi Corp., several industry observers said Thursday.

Although the buyout offers do not address the deep wage cuts Delphi is seeking from its workers, analysts say the plan is a sign of progress in the talks that could generate labor-cost savings for Delphi. If enough savings are attained, Delphi might ask for less-drastic wage cuts, they say.

"I don't think GM would make this big, sweeping agreement with the UAW with the feeling it could all fall apart," said George Magliano, an automotive industry researcher with Global Insight.

By encouraging enough high-wage Delphi workers to take buyouts or transfer to GM, Delphi might be able to propose a smaller wage cut to its workers, and ultimately avert a strike, observers say.

On Wednesday, General Motors, Delphi and the United Auto Workers announced plans designed to encourage tens of thousands of hourly workers at GM and Delphi to retire. Some older Delphi workers will be able to transfer to GM.

Delphi has said it needs a new labor agreement by March 30, or else it will ask a bankruptcy court judge the following day to throw out its labor contracts. Delphi reiterated that point after the buyout plans were announced. However, Delphi has twice delayed asking a judge to void its contracts.

UAW has threatened a strike at Delphi if its contract is thrown out. The threat hits home locally since Delphi has a Thermal and Interior division plant in Lockport with 3,800 workers, about 3,000 of them represented by the UAW.

Industry watchers say a strike would be crippling to GM's production of cars and trucks, since the automaker relies so heavily on Delphi as a supplier. GM employs about 2,500 people at its engine plant in the Town of Tonawanda.

Arthur Wheaton, an industry education specialist at Cornell University's School of Industrial and Labor Relations in Buffalo, said he believes the buyout plans defuse a strike threat because "it shows the union and management are talking together productively."

"A lot of people would say that this is the easiest part of the negotiations," Wheaton said.

David Cole, chairman of the Center for Automotive Research in Michigan, said he viewed the buyout plans as a sign of "huge progress" in the three-way talks aimed at reducing Delphi's costs.

"Nobody wants a strike," he said. "I think this sort of neutralizes the idea."

"This was a big step," Cole added. "They had to do this to make the other stuff possible."

William Ganley, a professor of economics and finance at Buffalo State College, said it remains to be seen how the buyout offers are received by UAW members at Delphi. "I think this takes some of the pressure off for a strike," he said.

The March 30 deadline has not gone away. Wheaton predicted that even if the talks progress but fail to reach a final agreement by that date, Delphi will file to void its union contracts March 31. For Delphi, that step would increase the company's leverage in the negotiations and give an added sense of urgency to the negotiations, Wheaton said.

Because the bankruptcy court would take more than a month to review the petition to void the contracts and hold a court hearing on the request, Wheaton said Delphi and the union could keep talking throughout April and into May to try to reach an agreement.

Delphi could not void the union contracts and unilaterally reduce wages without the approval of the bankruptcy court, and that likely would not occur until sometime in May, at the earliest, Wheaton said.

"It's a good sign, but I do not think it will stop their petition to eliminate the contracts," Wheaton said.

Not everyone agrees the possibility of a strike has been reduced. Gregg Shotwell of Soldiers of Solidarity, a dissident group of UAW members, said he believes the walkout threat remains despite the buyout plan "because it leaves so much unresolved."

Shotwell, a Delphi hourly employee in Michigan, calls the buyout plans a "buy-off," and said in an e-mail that the plans "promote an every man for himself response, rather than solidarity."

Some observers say the buyout and transfer offers presented to Delphi workers could reduce Delphi's labor costs and influence the amount of wage reductions the company seeks. Still unknown is how many Delphi workers will accept the buyouts or offers to transfer to GM.

GM has presented buyout offers to 110,000 of its hourly workers. The automaker might end up needing to hire workers at some plants to fill vacancies, said David Healy of Burnham Securities.

That could benefit Delphi, since GM might fill slots with high-cost Delphi workers who transfer, and clear out Delphi's "jobs bank," where workers are assigned with nearly full pay after an extended layoff.

Buyouts of Delphi workers would also help improve Delphi's long-range finances, Healy said. "The direct buyout of Delphi workers means Delphi will have a lot less $65-an-hour employees to ruin their profit-loss statements," he said.

That would ease some of Delphi's employment costs, he said. And if Delphi needs employees to fill vacancies, it could hire them at a cheaper rate than the UAW previously agreed to for new hires, Healy said.

News staff reporter David Robinson contributed to this report.

e-mail: mglynn@buffnews.com

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