Most of Delphi Corp.'s UAW employees may end up earning more by going fishing than by working for Steve Miller's cut-rate wages.
How? Thousands of them will get up to seven years' additional seniority under an obscure provision in the UAW's 1999 spinoff agreement with Delphi. That could allow the workers to retire early -- at General Motors' expense.
The provision, which takes effect if Delphi scraps its pension plan, could ease the pain for the most senior of Delphi's 25,000 UAW employees. It also could help grease Delphi's tense negotiations with the UAW to slash wages and close plants.
Delphi's workers could continue to work for the $9.50-an-hour wage that Delphi CEO Steve Miller has proposed. Or they could retire early, go fishing and receive a GM pension that is more generous than Delphi's proposed wage.
The impact could be dramatic, says Sean McAlinden, chief economist for the Center for Automotive Research in Ann Arbor, Mich. His prediction: "The rank and file are going to retire like a house afire."
The contract provision allows workers who came to Delphi from GM to claim up to an additional seven years of seniority if Delphi cancels its pension plan, a distinct possibility now that the company is in Chapter 11 bankruptcy reorganization.
The provision was presciently negotiated by the UAW to protect former GM workers if Delphi were to founder. It would allow workers with 23 or more years of combined GM and Delphi seniority to retire with a GM pension.
At least half of Delphi's 25,000 UAW workers already are eligible for retirement. The extra seven years of seniority provision would make thousands more eligible. The precise number isn't clear.
Implications of the deal became clear in October when GM negotiated an agreement with the UAW to trim GM's health care costs. As part of the deal, GM acknowledged that it had broadened the seniority provision for Delphi workers to include retiree health care as well as pensions.
GM told Wall Street that the health care benefit would generate a $1 billion liability, raising its potential Delphi-related pension liabilities to a maximum of $12 billion. If Delphi cancels its pension plan, GM would be responsible for pension costs not assumed by the federal government's Pension Benefit Guaranty Corp., which protects pensioners.
The development comes at a tense moment in Delphi's relationship with the union. Last week a rank-and-file UAW Web site revealed that Miller is demanding wage cuts for hourly workers from an average of $27 an hour to as little as $9.50 an hour for production workers. A wage of $9.50 an hour is equal to $19,760 annually, or $410 above the national poverty threshold of $19,350 for a family of four.
The proposed cuts in pay and health care benefits are even deeper than what the company sought before putting its U.S. operations in Chapter 11 bankruptcy protection on Oct. 8.
Miller also wants nonwage concessions: He wants a no-strike provision and the unfettered ability to outsource work, including mechanical repairs and tool building.
If the Troy, Mich.-based supplier pays less than $16 an hour, UAW workers actually could earn more in retirement -- about $36,000 a year -- than by working. And as retirees, they would enjoy better health care benefits.
As of 2003, Delphi's average hourly worker was 47 years old, with 27.5 years of service. Hourly workers are eligible for retirement after 30 years.
GM spokesman Jerry Dubrowski declined to comment on the early-retirement issue.
Delphi spokesman Lindsey Williams called the early-retirement provision "an important tool" to help Delphi's effort to return to profitability.
Gregg Shotwell, a machine operator at Delphi's fuel injector plant in Coopersville, Mich., estimated that more than 350 of the plant's 500 production workers would be eligible for retirement if they are offered an extra seven years of seniority.
Shotwell, a contributor to rank-and-file Web site futureoftheunion.com in Kokomo, Ind., said workers might feel they are escaping trouble by retiring. But once they are out the door, he warns, they will have no say if the union negotiates cuts in retiree benefits:
"I look at it this way: My retirement security is based on the people I leave behind," he told Automotive News.
If the UAW negotiates new terms with Delphi, the rank and file will vote on the accord. If negotiations collapse, Miller says he will ask the bankruptcy court in New York to terminate the current labor contracts and impose new ones in 2006.
The court has given Delphi and its unions until Dec. 16 to negotiate new contracts.
You may e-mail Dave Barkholz at [email protected]