General Motors, the UAW and Delphi Corp. made a serious mistake by failing to negotiate a bailout for Delphi before it filed for Chapter 11 protection from its creditors. Now they must bargain with a sense of urgency to reach an equitable settlement before a bankruptcy judge in New York takes the matter out of their hands.
Delphi must emerge from bankruptcy with a reorganization plan that will enable it to survive. To do so, it must cut its labor costs. By Friday, Oct. 21, Delphi intends to make an offer to the UAW and other unions that represent its employees.
If the company and the unions can't agree on how to cut costs by Dec. 16, Delphi will ask the bankruptcy court to void the contracts. That could lead to strikes and production disruptions for Delphi's customers, which can ill afford the losses.
Delphi CEO Steve Miller says the supplier is honoring its contracts with GM, its largest customer, and has not asked for price increases. Delphi needs to be allowed to compete for future GM business so it can forge a five-year reorganization plan that permits the company to be profitable and maintain its pension plan.
Miller complains about unfair media coverage of the fat bonuses and severance packages given to executives to keep them from defecting. The packages have longer noncompete clauses, which he says are necessary to keep executives in place. Miller argues that while Delphi's hourly workers are paid well over market value, its executives were paid less than market value. Nonsense. If they could earn more elsewhere, they would.
As a show of good faith, Delphi should rescind the bonuses and severance packages. They were ill-advised and unseemly.
It's a difficult situation, but it doesn't have to devolve into a zero-sum game. All sides must be realistic in their expectations. Delphi, GM and the UAW must reason together and bargain in good faith for the well-being of all.