Delphi Could Void Contracts

Updated from 11:01 a.m. EST

General Motors (GM) and the United Auto Workers union separately criticized Delphi (DPHIQ) Friday as the bankrupt auto supplier said it would file motions in court to void its agreements with them.

GM's former subsidiary also unveiled plans for a major restructuring that will eliminate a quarter of its salaried workforce and unload as many as 21 U.S. plants.

Delphi filed two motions Friday morning seeking to reject its U.S. labor agreements and to modify retiree benefits. It will also seek to terminate unprofitable supply contracts with GM. Court hearings have been scheduled for May 9 and 10, giving the parties a five-week period so they can continue working on agreements before the hearing. The court also directed the parties to promptly "meet and confer" to resolve the motion.

In three-way negotiations between Delphi, GM and the United Auto Workers, no agreement has been reached in lowering wages paid to Delphi's hourly workers as part of the parts supplier's push to lower its labor cost structure in bankruptcy court. If Delphi's union contracts are ultimately voided, workers are threatening work stoppages that could cripple the company, along with GM, which depends on a steady stream of parts from Delphi for its production lines.

Delphi recently proposed lowering hourly wages to $22 from $27, marking an increase from its proposal last fall of lowering wages to $12.50 per hour. Under the latest proposal, Delphi's hourly wages would be reduced to $16.50 per hour next fall and workers would be paid $50,000 as a "wage buydown" payment.

"Delphi's proposal goes far beyond cutting wages and benefits for active and retired workers," said the UAW in a statement. "Delphi's outrageous proposal would slash the company's UAW-represented hourly workforce by approximately 75%, devastating Delphi workers, their families and their communities."