UAW Sets Strategy for Delphi Dealings

Court fights could go on — and so could contracts

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The United Auto Workers is quietly adopting a strategy that could prolong its court fight with the bankrupt Delphi Corp., but lessens the chance of a strike that could cripple General Motors.

In a new memorandum filed with the court in New York, the UAW has accused the Delphi Corp. of failing to negotiate in good faith and is trying to use the bankruptcy proceedings to pry concessions out of the union. The 55-page memorandum, however, also indicates that the union believes it has adequate grounds for an all-out court fight against Delphi's effort to undo its labor contracts.

The court-centered strategy also seems to fit with UAW President Ron Gettelfinger's overall effort to resist concessions whenever possible without getting drawn into direct confrontation. If concessions can't be avoided, the goal is then to negotiate the least painful deals possible for union members. The strategy is now playing out at Tower Automotive, which is trying to re-negotiate its contracts with the union and has also gone to court to get its labor contracts revised. The Tower matter is still unresolved.

UAW officials note privately that there are relatively few cases in which a bankruptcy judge has set aside a labor contract. The usual course of action in bankruptcy proceedings is for the judge to pressure both sides to negotiate in good faith.

Delphi, they note, hasn't done that yet. Instead they have offered the union incomplete proposals that rest on a hypothetical agreement with General Motors. General Motors, meanwhile, has filed papers of its own indicating that it is not willing to subsidize the wages of Delphi's workers. Delphi's management freely entered into the current agreements in 1999 and in 2003, the GM filing noted.

The memorandum of law filed at the end of last week by the UAW's lawyers also accused Delphi of withholding critical financial information from the union. It also described Delphi's motion asking the bankruptcy judge to set aside its current labor contracts as fundamentally flawed.

Judge Robert Drain, who is presiding over the bankruptcy hearing, has scheduled two days of hearings in early May on the Delphi motion to have the court set aside its current labor contracts.

The union's lawyers also indicated in the memorandum that they are prepared to challenge whether the court has the constitutional jurisdiction to consider Delphi's motion, raising the possibility of a drawn-out fight through the appellate courts.

A drawn-out fight would postpone indefinitely any kind of strike, but it also could mean that Delphi would be left with the current wages and benefits indefinitely, or until the contract expires in September of 2007. Delphi has proposed terminating the existing contracts on July 1.

The union memorandum also noted that Delphi has failed to take into account the impact of its special attrition program, which will produce significant cost savings for Delphi. "Delphi's rejection motion is premised upon financial projections that do not take these estimates into consideration," it noted.

"Delphi's use of rejection motion as a bargaining tool and the clear likelihood of a strike at Delphi - and perhaps GM - if the collective bargaining agreement is rejected requires denial of Delphi's rejection motion," the memorandum said.

"Its efforts to short-circuit the process through litigation that would, if successful, distort the statutory requirements beyond recognition, should not be countenanced," the memorandum said.

"For a case that Delphi's CEO considers to be a flashpoint, a test case, for all the economic and social trends that are on a collision course in our country and around the globe there should be no short cuts," the union papers said.

The memorandum also noted that the UAW is prepared to discuss modifications that are necessary for Delphi's survival. "But the place to do that is through the bargaining process and not through a misguided, litigation-driven strategy," it added.

The United Steel Workers, the third of Delphi's three principal unions, also has filed a motion asking the court to reject Delphi's motion.Delphi chairman and chief executive officer Robert "Steve" Miller has described the company's request for relief from its current contracts as a "slam dunk."

Delphi asked for court protection under Chapter 11 of the bankruptcy code in October and last month unveiled a re-organization plant that would lead to the sale or closure of 21 of its 29 manufacturing plants in the U.S. The plan also would cut the company's blue-collar workforce of 34,000 by more than two-thirds.

Miller also has said he wants Delphi to leave bankruptcy by the middle of 2007. However, a prolonged court fight complete with appeals could hobble Delphi's plans for emerging from bankruptcy while draining away the company's available resources.