| BUSINESSWEEK ONLINE : FEBRUARY 1, 1999 ISSUE | ||||||||
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| COVER STORY
Delphi Pushes a Peace Program When executives from GM's Delphi Automotive Systems unit hit the road on Jan. 25 to drum up investors for next month's initial public offering, they'll have help from some surprising allies. Union leaders, including some who forced the shutdown of General Motors Corp.'s auto unit just two years ago, are rallying to the cause of spinning off the parts giant. ''I should go out and promote my team,'' says Harold W. ''Nick'' Nichols, chief negotiator for 14,500 Delphi workers represented by the International Union of Electronic, Electrical, Salaried, Machine, & Furniture Workers (IUE). That's a remarkable shift, but Nichols and other union leaders figure that if they can help make Delphi a winner, they'll have more leverage at the bargaining table in the future. Even the more militant United Auto Workers (UAW), with its 46,000 Delphi members, isn't likely to throw a wrench into the spin-off plans. Although top leaders oppose the spin-off, some plant-level union leaders realize that cooperation may be the only way to save their jobs. Says Gary Hill, president of Local 696 at GM's Dayton brake factory, long a trouble spot for GM labor relations: ''There's too much riding on the line for 'He said, she said.''' Now, Chief Executive J.T. Battenberg III is keeping his fingers crossed that labor peace lasts. ''We are trying to build a future together,'' he says. Small wonder. With some on Wall Street fearful that a renewed strike threat could scare away investors, bad news on the labor front could depress Delphi's stock. In the first phase of the spin-off, GM hopes to raise more than $1.5 billion by selling 17.7% of Delphi for 15 to 18 a share. The rest will be divested by late 1999. MORE DISCLOSURE. To ensure he has plenty of maneuvering room, Battenberg wants to negotiate a national labor agreement separate from the one GM will negotiate with its unions later this summer. Delphi's unions will likely fight that plan, but Battenberg hopes to win them over by disclosing more financial information to them than GM typically would. What they'll see isn't pretty: Delphi reported earnings before restructuring charges of just $370 million last year, on sales down 9%, to $28.5 billion. Battenberg figures that as they pore over the numbers together, labor leaders will help him push through cost-cutting programs and more flexible work rules. Ultimately, though, he will also need wage cuts that the union now opposes. If all goes according to plan, Battenberg will be able to boost efficiency and make Delphi more competitive with nonunion suppliers. Merely getting out from under the GM structure should go a long way. For starters, Delphi will be better positioned to win business from rival auto makers. Delphi now gets about 65% of revenues from GM's North American unit and another 16% from GM abroad. Battenberg wants to get North America down to 50%. Still, Delphi has a rough road ahead. It will be hard pressed to compete against nonunion shops, whose workers earn about one-third the pay and benefits of Delphi's unionized employees. With a GM supply contract that guarantees Delphi the right to match the lowest bid on any GM contract until 2002, Delphi will have a couple of years before it truly has to fly on its own. But after that, GM will be free to take its business elsewhere. ''Delphi has been in the GM cocoon so long, the risk is that they'll find the real world pretty cold out there,'' says Burnham Securities analyst David B. Healy. True enough, but it hasn't been too hot within GM lately, either. By Joann Muller in Detroit _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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