The U.S. auto industry was rocked Saturday as Delphi Corp., the world’s second- largest parts manufacturer, filed for bankruptcy and laid plans to dramatically downsize its U.S. operations.
Detroit’s Big Three automakers and their workers, suppliers and investors had anticipated the filing for years, some with dread and others with hope.
At stake is the survival of Delphi, a global giant with 185,000 employees and annual sales of $28 billion, and the wages, benefits and jobs of its 33,000 unionized workers across the country.
In its Chapter 11 filing in U.S. Bankruptcy Court in New York City, Delphi said a “substantial segment” of its U.S. manufacturing base will be sold off or phased out over the next two years.
The company also will move to slash union wages up to 60 percent, cut health care benefits and free itself of pension obligations to tens of thousands of employees inherited when Delphi was spun off from General Motors Corp. in 1999.
“I think we all understand very well that life is not going to continue the way it has been,” Delphi chairman Robert “Steve” Miller told The Detroit News after the filing Saturday. “Things have to change.”
Miller said he has assured GM and Delphi’s other customers that a wide range of auto parts crucial to their assembly plants will continue to be built and shipped on time.
He said Delphi’s U.S. workforce will be largely unaffected during the first three to six months of the bankruptcy process.
But bigger issues loom down the road, as Delphi becomes the test case for unraveling decades of financial gains by the United Auto Workers to level the playing field with lower-cost parts makers in Mexico, South America and Asia.
“This is the world’s second-largest auto supplier, a former part of GM, going through a wrenching downsizing,” said Harley Shaiken, professor of labor at the University of California at Berkeley. “This isn’t just dollars and cents. This is mortgages and communities and college educations.”
Delphi’s board of directors formally approved the Chapter 11 filing in a conference call Saturday morning with Miller and other executives at Delphi’s headquarters in Troy, Mich.
The filing provoked an angry reaction from UAW president Ron Gettelfinger, underscoring the legal battles to come as the union fights to protect the wages and benefits of the 24,000 Delphi workers it represents.
Calling the decision “an extremely bitter pill,” Gettelfinger promised to fight hard in court for the rights of active union members and Delphi’s estimated 12,000 U.S. hourly retirees.
“We will vigorously use our experience, expertise and resources to protect the interests of UAW Delphi workers and retirees throughout this process,” he said.
