Delphi strike better now than in 2007, executive says

NEW YORK -- Delphi Corp. would only weaken further and face potentially more damaging strikes next year if it does not address labor costs now, its chief negotiator testified on Wednesday.

"In my opinion, a strike in 2007 would be far more devastating than a strike this summer," Kevin Butler, vice president of human resource management for Delphi, said in the second day of a U.S. Bankruptcy Court hearing in New York.

"I base that on my understanding and belief that the company grows weaker over time," he said, adding that customers who usually place large long-term orders may look elsewhere if they question Delphi's ability to fill the orders.

Butler also testified it would be "much more difficult" to negotiate cost cuts with unions after the expiration of a benefit guarantee from former parent General Motors. The guarantees help provide a "soft landing" for affected workers, he said.

Under the terms of its spinoff of Delphi in 1999, GM agreed to guarantee the pensions and benefit obligations of its union workers if Delphi is unable to fulfill them. GM has estimated its liability could range from $5.5 billion to $12 billion.

Delphi's collective bargaining agreements with the unions expire in September and October of 2007. Delphi is asking Judge Robert Drain for permission to nullify those agreements now so it can cut wage and benefit costs more quickly and restructure its money-losing North American operations.

Unions representing nearly all of the more than 33,000 U.S. hourly workers have threatened to strike Delphi if their contracts are voided, a move that could quickly shut down the parts supplier and its major customer GM.

Butler, a member of the Delphi strategy board, oversees collective bargaining with unions.

In their cross-examination, union lawyers asked about the timing and substance of three wage proposals Delphi made to unions since its October 2005 bankruptcy filing. They tried to show the company faces a bigger threat to its survival by voiding its labor contracts now than it does by waiting for current agreements to expire next year.

A third day for the hearing is scheduled for Friday, May 12, and at least two more dates are set for later this month. A total of 34 witnesses are expected to be called, 13 of them by Delphi.

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