Delphi Lets Salaried Workers Off the Hook for Shift in Health Care Costs

November 18, 2005 ( - Bankrupt Delphi Corp. has decided not to shift more health care costs to salaried workers in 2006, while hourly workers are being hit with huge increases.

According to the Detroit News, Delphi said its salaried employees already pay a higher percentage of their health care costs and should not have to pay more. The auto parts supplier has been criticized by its labor unions for making large demands of hourly workers while letting senior management off the hook for decisions that led the company into Chapter 11. It also has been blasted for pampering executives with generous compensation, bonus and severance packages, Detroit News said.

Lindsey Williams, a Delphi spokesperson, said, “There’s been more cost-sharing on the part of the salaried work force than there has been on the part of the hourly work force. This is not a ‘we-versus-them.’ This is what’s considered equitable.”

As in 2005, Delphi’s white-collar workers will pay 27% of their health care costs in 2006, Williams said. The firm’s hourly workers paid 7%t of their health care costs this year, but that percentage will rise sharply if Delphi is successful in pushing through a proposal to slash the wages and benefits of its hourly workers in bankruptcy court.

In a proposal to the United Auto Workers (UAW) and its other labor unions, Delphi asked rank-and-file workers to accept “out-of-pocket” expenses of $2,500 a year for an individual and $5,000 for a family. Under the plan, workers would have to pay monthly premiums of up to $240 and deductibles of up to $1,800. Prescription drug costs would increase to $10 for generic and between $20 and $40 for name-brand drugs. Delphi says that even if its unions agree to the higher health costs in the October 21 proposal, hourly workers will still pay a smaller percentage of their health costs than its salaried employees.

However, under the proposal, Delphi also wants to eliminate dental and vision benefits and lower wages to $9.50 per hour, down from $27.50 per hour today, which would make it more difficult to pay for higher health care expenses.

The proposal also moved to freeze the union pension plan and eliminate retiree health care (See Delphi Looking for Health and Pension Benefit Freeze ).

Delphi Chairman Robert S. “Steve” Miller said if the company’s unions do not accept some form of concessions by mid-December, he will ask the bankruptcy court to reject existing labor costs. That could set the stage for a strike at Delphi by early next year.

Last spring, Delphi said it would eliminate health care coverage for its salaried retirees once they become Medicare eligible at 65 years-old. The change, which takes effect on January 1, 2007, is expected to reduce the company’s future benefit obligations by more than $500 million.

In OctoberGeneral Motors Co. reached an agreement with the United Auto Workers to raise medical costs for blue-collar workers and retirees (See GM Reaches Health Care Deal With Union ). GM had already previously raised health care co-pays for salaried employees.