U.S. auto parts sector vulnerable to Delphi strike
Reuters / October 14, 2005
CHICAGO -- The U.S. auto parts sector faces potential supply shocks if
hourly workers strike Delphi Corp., which is pursuing wage and benefit
concessions from its unions, a key focus of its bankruptcy reorganization,
an analyst said.
"It's a distinct possibility that a work action does take place somewhere
through the course of this bankruptcy," Fitch Ratings managing director Mark
Highlighting that possibility, Richard Shoemaker, the United Auto Workers
official responsible for labor contract negotiations with Delphi, told
Reuters on Thursday, Oct. 13, that a strike "certainly is one of the options
that is available" to the union.
Delphi, which filed the biggest bankruptcy in U.S. automotive history Oct. 8
in New York, has said it wants to negotiate significant cost cuts with its
unions and plans to submit written proposals to them next Friday.
However, Delphi also has told the U.S. Bankruptcy Court that it plans to
begin the process of rejecting the agreements in mid-December if it cannot
reach a deal with its unions that would significantly cut its U.S.
"We have not yet seen any supply disruptions, but it remains a key risk,"
Oline said. "That risk will only increase as we get closer to a date where
Delphi, if unable to achieve a contract with a UAW, needs to impose a
Delphi has about 50,600 employees in the United States, including 34,750
hourly workers, almost all represented by unions. Delphi had sought to
negotiate wage and benefit cuts from the UAW to avoid bankruptcy, amid
reports that suggested it sought cuts as deep as 63 percent.
"The extent of the wage and benefit reductions Delphi is seeking would be
difficult for any union to swallow easily," Oline said, adding that Fitch is
also keeping close watch on Delphi's plan for its pensions.
Smaller suppliers, which can be more vulnerable to cash flow interruptions
than larger companies, may feel some pressure because of payment
A missed customer payment could be a tipping point, but that has not
happened so far with the bankruptcy cases of Collins & Aikman Corp. and
Tower Automotive Inc. and appears unlikely in the Delphi case, said Neil De
Koker, president of the Original Equipment Suppliers Association.
"I don't suspect there will be a rash (of bankruptcies), but there will be
other Chapter 11s because the industry is still struggling," he added.
The vast majority of smaller suppliers probably have no more than a few
percentage points of business with any one company and should weather the
storm without having to file for bankruptcy themselves, De Koker said.
Collins & Aikman, which manufactures automotive interiors, filed for
bankruptcy protection in May and Tower Automotive, an auto-body frames
producer, filed for Chapter 11 in February.