DETROIT (AP) _ When Robert S. ``Steve'' Miller took over as chairman and chief executive of auto parts supplier Delphi Corp. last summer, the veteran of turnarounds at Bethlehem Steel and Chrysler Corp. said the era of hefty union wages, underperforming plants and defined-benefit pensions was coming to an end.
On Friday, Miller made good on his prediction with a restructuring plan that calls for cutting 8,500 salaried jobs and shutting or selling one-third of Delphi's plants worldwide. The company also asked a judge to void its labor contracts and reject some unprofitable contracts with General Motors Corp., its former parent and largest customer.
Delphi said its actions could help it emerge from Chapter 11 in the first half of 2007 as a lean, focused and profitable company. But they also could provoke a strike that would rattle the auto industry and push GM perilously close to bankruptcy.
The United Auto Workers warned ``it will be impossible to avoid a long strike'' if the judge agrees to void Delphi's contracts and Delphi imposes its most recent wage proposal, which would cut U.S. hourly workers' pay by nearly 40 percent.
GM already is struggling with declining U.S. market share and spiraling costs and is in the midst of its own restructuring. In a recent note to investors, Merrill Lynch analyst John Murphy estimated a Delphi strike could cost GM up to $130 million per day.
GM shares rose 14 cents to $21.20 on the New York Stock Exchange. Delphi shares no longer trade on the NYSE.
``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.''
GM said it will continue negotiating with Delphi and its unions on an agreement to lower wages. But the UAW, which represents 24,000 of Delphi's 33,000 U.S. hourly workers, said the company's move could stall talks.
``Indeed, today it appears there is no basis for continuing discussions,'' the UAW said in a statement.
``Delphi's misuse of the bankruptcy procedure to circumvent the collective bargaining process and slash jobs and wages and drastically reduce health care, retirement and other hard-won benefits or eliminate them altogether is a travesty and a concern for every American.''
Delphi, GM and its unions spent months negotiating but were unable to reach a wage agreement. GM is part of the talks because it is liable for some of Delphi's pension obligations and the outcome of the talks is critical to its future. GM accounted for just less than half of Delphi's $26.9 billion in annual revenues last year.
Under its most recent proposal, Delphi wanted pay for current hourly workers to drop to $22 per hour from $27 per hour through September 2007, then to $16.50 an hour. Delphi counted on GM to supplement those wages; without GM's assistance, Delphi said, pay would drop to $12.50 an hour.
After the UAW and other unions rejected that proposal, Delphi filed the motion to void its labor contracts, an action it had delayed three times before. In its court filing, it says it pays workers $78.63 per hour in wages and benefits, or over three times more than the average auto supplier.
Judge Robert Drain has scheduled a hearing on Delphi's request for May 9-10 and won't 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. Workers are planning to protest Monday in Detroit outside a luncheon where Miller is speaking.
But the restructuring won't stop at hourly workers. Delphi plans to cut 25 percent of its global salaried work force, or around 8,500 workers, including up to 40 percent of its corporate officers. Delphi said that measure should save $450 million per year.
The company has identified eight U.S. plants that are considered critical to its U.S. operations. They are located in Brookhaven, Miss; Clinton, Miss.; Grand Rapids, Mich.; Kokomo, Ind.; Lockport, N.Y.; Rochester, N.Y.; Warren, Ohio; and Vandalia, Ohio. Delphi said those plants will focus on profitable parts such as safety features, electronics, diesel and gas powertrains and climate control products.
Twenty-one other U.S. plants that do not make core products _ including those that make brakes and chassis, instrument panels, door modules and steering components _ would be sold or closed by 2008 under Delphi's plan. That includes plants in Milwaukee; Dayton, Ohio; Kettering, Ohio; Anderson, Ind.; Laurel, Miss.; Athens, Ala.; Flint, Adrian and Saginaw.
``We believe many of these product lines have the potential to compete successfully under new ownership that has the resources and capital to invest in them,'' Delphi President and Chief Operating Officer Rodney O'Neal said in a statement.
Delphi also is asking the court to reject unprofitable contracts with GM. The initial motion covers around half of Delphi's annual volume with GM. Delphi said the judge is expected to consider the motion on May 12, which gives both companies time to continue negotiating prices.
GM said such motions are common during reorganizations and it has reached agreements with other suppliers in the past.
Delphi also said it will freeze pension benefits for hourly workers on Oct. 1 and for salaried workers on Jan. 1 and will replace them with plans that require employee contributions with company matches. Workers will still have access to any accrued benefits. The company also may ask for relief from the Pension Benefit Guaranty Corp. so that when it emerges from bankruptcy protection it won't immediately owe billions of dollars to its underfunded pension plan. The company expects it will take at least six years to fully fund its plan.
Analysts said Delphi made the only choice it could to ensure its survival.
``I think Steve Miller did what he had to do. He threw the softest hardball he could, by seeking to negotiate but starting the clock,'' said Pete Hastings, an analyst with the investment company Morgan Keegan & Co. ``I think he's doing what he needs to do to make Delphi in the U.S. profitable.''
JPMorgan analyst Himanshu Patel said he continues to believe GM will agree to fund a wage agreement because it's cheaper than going through a strike. Delphi, GM and the UAW also have shown some ability to compromise. Last week, Delphi announced a buyout offer for approximately 17,000 U.S. hourly workers that will be bankrolled by GM. Under that agreement, workers will be eligible for a lump sum payment of $35,000 to retire. An additional 5,000 workers will be allowed to return to GM.
But unions insisted they won't make it easy for the company, which they say has shown little interest in collective bargaining.
``Actions like this just bring us one step closer to confrontation,'' said Henry Reichard, who represents plants in Ohio and other states for the International Union of Electronic Workers-Communications Workers of America, which covers 8,000 Delphi hourly workers.