The new programs will have company matches and workers will still have access to any accrued benefits in the existing defined benefit plans, Delphi said in a statement announcing a broad restructuring plan that included asking a judge to void its labor agreements.
Delphi officials also said that keeping the existing defined benefit plan assets whole will require an agreement with regulators including the Pension Benefit Guaranty Corporation (PBGC), the Internal Revenue Service and the Department of Labor (DoL) to give Delphi more time when it emerges from bankruptcy protection to make the required pension contributions. It may take as long as six years after emerging from bankruptcy to have the plan fully funded, the company admitted in Friday’s statement.
The cost-cutting plan outlined Friday would cut 8,500 salaried jobs and shut a third of its plants worldwide, according to an Associated Press news report.
Not surprisingly, the United Auto Workers (UAW) warned “it will be impossible to avoid a long strike” if a bankruptcy judge agrees to void the contracts and Delphi imposes its most recent wage proposal. A strike could put General Motors Corp., Delphi’s former parent and largest customer, perilously close to bankruptcy and hurt other automakers and smaller suppliers as well, according to the news report.
“We disagree with Delphi’s approach, but we anticipated that this step might be taken,” Rick Wagoner, GM’s chairman and chief executive officer, said in a statement. “GM expects Delphi to honor its public commitments to avoid any disruption to GM operations.”
“We are clearly focused on Delphi’s future,” Delphi Chairman and CEO Robert Miller said in a statement. “Emergence from the Chapter 11 process in the US requires that we make difficult, yet necessary, decisions.”
Troy-based Delphi filed for bankruptcy in October and intends to emerge from bankruptcy during the first half of 2007. To meet that goal, it plans to exit certain product lines and sell or close non-core plants by 2008, including 21 of its 29 US plants. Delphi’s motion to void its labor contracts was widely expected; the company had delayed similar motions three times before.
Bankruptcy Judge Robert Drain has scheduled a hearing on Delphi’s request for May 9-10 and will not decide whether to void Delphi’s contracts until after that hearing. If Drain allows Delphi to void its contracts, Delphi would still have to take the step of throwing them out before the unions could strike, although the company already faces the threat of unauthorized strikes and worker slowdowns, the news report said.