Delphi Reaches Tentative Agreement with UAW and GM

By Brendan Moore

06.23.2007

Delphi announced yesterday that it has reached a tentative agreement with both the UAW and General Motors that allows the company to substantially reduce wages and escape from bankruptcy proceedings initiated in 2005.

The deal must still be ratified by member vote by the UAW, and the deal must also be approved by the federal bankruptcy court handling the case, but it is expected that both things will happen now that agreement has been reached with the UAW and GM. The reason GM is involved is because it is Delphi’s largest customer and if Delphi goes down, it would have a very negative effect on GM’s operations. GM reportedly made a large contribution to the agreement through promised one-time payouts.

GM starts its own negotiations with the UAW next month, which promise to be extremely contentious.

Delphi employees currently make as much as an average $27 an hour. Delphi wanted to reduce that hourly wage to around $10 an hour, which is where it stated wages needed to be in order for the company to be profitable going forward. Sources say the average wage provided for in the new agreement will go up to $18.50 an hour.

The new agreement is important in that it will have profound effects across the auto industry in Detroit. Any UAW concessions will ripple across the rest of the companies in the auto industry that employ UAW workers.

Here is the official press release from Delphi:

TROY, MI, Jun 22, 2007: “Delphi Corp. announced today it reached a tentative agreement and signed a Memorandum of Understanding with the UAW and General Motors covering site plans, workforce transition as well as other comprehensive transformational issues. The agreement is subject to union ratification and approval by the U.S. Bankruptcy Court. “If ratified, we believe this agreement will be a significant milestone in our transformation and a major step towards emergence,” said John Sheehan, Delphi’s chief restructuring officer. “The Memorandum is a testament to the dedication and hard work of the UAW, Delphi and General Motors teams.” Delphi will not provide commentary on the details of the Memorandum at the current time.”

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Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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1 Comment

  1. That is a huge drop in the hourly pay! I’m surprised the union would agree to that.

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