Delphi Union Accord Closes Seven Plants, People Say (Update3)

Bankrupt auto-parts supplier Delphi Corp. will close seven plants represented by the United Auto Workers, keep four and sell the rest under an agreement reached with the union today, people with knowledge of the talks said.

Union workers at the former General Motors Corp. unit will get a combination of bonuses or buyouts, as well as the ability to accept available jobs at GM plants, based on their seniority, said the people, who asked not to be identified because the contract hasn't been ratified.

``It's a breakthrough in the industry, not only the auto supplier industry but also for the Detroit three,'' said Gerald Meyers, a former American Motors Corp. chief executive who is a business professor at the University of Michigan in Ann Arbor. ``It's very timely and necessary that the Delphi agreement be concluded at this point in time.''

The deal at Delphi, GM's largest supplier of parts, ends a two-year dispute that had threatened GM with a costly strike. GM Chief Executive Officer Rick Wagoner said this month that he wanted a Delphi agreement before his own labor talks with the UAW start next month. GM has had losses of more than $12 billion in the past two years.

17,000 Workers

The agreement signals ``that the negotiations that are ahead of them for the next 90 days will be unhampered by the possibility that a Delphi strike could occur and General Motors might be shut down,'' he said. ``This agreement augers well for what is coming for the months ahead.''

Delphi will keep plants open in Lockport and Rochester, New York; Grand Rapids, Michigan; and Kokomo, Indiana, the people said.

The supplier will sell plants, including those in Sandusky and Dayton, Ohio, and Adrian and Flint, Michigan, said three people who attended a union meeting today in Detroit or were briefed by those in attendance. Among the seven plants to be closed is one in Columbus, Ohio, they said.

Delphi spokesman Lindsey Williams and UAW spokesman Roger Kerson declined to comment on details of the agreement.

The accord, if ratified, will be ``a major step toward emergence,'' Delphi Chief Restructuring Officer John Sheehan said in a statement today. The Troy, Michigan-based company declined to give details. GM said the deal covers 17,000 Delphi workers represented by the UAW, the biggest union at the partsmaker.

Averts Strike

GM doesn't expect its costs for Delphi to increase from its estimate in May, spokeswoman Renee Rashid-Merem said.

Delphi has sought wage and benefit cuts from the unions and financial help from former parent GM since filing for bankruptcy protection in October 2005. The agreement averts a potential strike that might have shut down assembly lines at GM, which gets more parts from Delphi than from any other supplier.

Delphi needs agreements with unions led by the UAW to trigger a potential $3.4 billion investment by a group headed by Appaloosa Management LP. David Tepper, president of Chatham, New Jersey-based Appaloosa, couldn't be reached for comment.

Delphi seeks to exit court protection later this year.

$7 Billion

GM is reviewing today's agreement, Rashid-Merem said in an interview. The Detroit-based automaker said in a May 24 filing it expects retirement costs for former GM workers at Delphi to total $7 billion. In addition, after an initial payment of $500 million, GM said it will have continuing labor-related costs of $300 million to $400 million annually for an unspecified time and ``transitional'' payments of an additional $100 million.

As part of the 1999 spinoff of Delphi, GM agreed to cover the retirement costs for certain former GM employees now with the company if Delphi couldn't cover those costs. Delphi also asked GM to help cover additional costs to allow it to emerge from bankruptcy.

UAW President Ron Gettelfinger and Vice President Cal Rapson confirmed the agreement in a statement and said details are being withheld for ``explanation and ratification meetings by our local unions.'' They didn't give a time frame for ratification.

After the bankruptcy filing, Delphi Executive Chairman Steve Miller said he wanted to keep only eight of 29 U.S. plants by Jan. 1, 2008, including the four UAW plants in New York, Michigan and Indiana that will be kept open. Miller intended to stop making brakes, chassis, catalysts, cockpits, door modules, instrument panels, wheel bearings and steering systems.

Asset Sales

Delphi has already announced the pending sales of an interiors unit, a brake-hose group, a catalyst business and a steering group.

Billionaire industrialist Ira Rennert's Renco Group Inc. said Feb. 20 that it wanted to buy the interiors unit, which makes cockpits and door parts at plants in the U.S., Mexico, Austria, Germany, China and South Korea.

Delphi said Jan. 29 that it plans to sell its brake-hose business to Harco Manufacturing Group LLC of Englewood/Clayton, Ohio. The next day, Delphi picked Platinum Equity Holdings LLC, founded in 1995 by billionaire Tom Gores, to buy its steering business. It is the biggest unit Delphi intends to sell.

Delphi also has a pending deal to sell its catalyst business to Umicore SA for $55.6 million, which includes a U.S. plant in Tulsa, Oklahoma.

GM shares fell 50 cents to $35.46 on June 22 in New York Stock Exchange composite trading. Delphi's were unchanged at $2.67 in over-the-counter trading.

All of the proposed sales must receive U.S. Bankruptcy Court approval. The labor accord also requires confirmation by U.S. Bankruptcy Judge Robert Drain.

The case is In re: Delphi Corp., 05-44481, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Source : http://www.bloomberg.com