Delphi, Visteon Pact to Trade for Job Security

Detroit's two largest auto suppliers, Delphi Corp. and Visteon Corp., are close to reaching a historic 7-year contract with the UAW that dramatically cuts the wages for all future hires, and requires them to pay for more of their health care and much of their retirement, UAW and company sources have told the Free Press.

From Detroit Free Press

DETROIT — Detroit’s two largest auto suppliers, Delphi Corp. and Visteon Corp., are close to reaching a historic 7-year contract with the UAW that dramatically cuts the wages for all future hires, and requires them to pay for more of their health care and much of their retirement, UAW and company sources have told the Free Press.

This new pact would set the lower second-tier wage and benefit structure the UAW agreed to negotiate as a supplement to last year’s contract with Detroit’s three automakers.

The fact that the UAW is negotiating lower wages for new workers in order to preserve the pay and benefits of existing members is seen as an example of how far the union is willing to go to reverse decades of membership declines. Situations that put people doing the same work side-by-side for different pay have long been opposed by the UAW and other unions. These talks would produce the most extensive two tier wage and benefit plan agreed on by the UAW. In return for these concessions, Delphi and Visteon would agree not to close, consolidate or sell any U.S. plants without the UAW’s approval until the contract expires in September 2011.

As talks stand now, future UAW hourly employees at Delphi and Visteon likely will be paid starting wages of $14 per hour, pay up to $2,000 a year for family health care and be offered a retirement-savings account, such as a 401(k) plan, instead of a traditional employer-funded pension plan, say UAW and company officials who have been briefed on the negotiations.

This would represent a major change from the current employment arrangement at Troy, Mich.-based Delphi and Dearborn, Mich.-based Visteon, the two largest auto parts companies in the U.S. The companies’ nearly 55,000 UAW workers make on average of $24 per hour, the companies pay for almost all UAW employee health care, and today’s UAW retirees can get $2,805 a month in company-funded pensions.

Future hires also will not get many of the standard perks of UAW workers at Delphi and Visteon, such as full retirement after 30 years, tuition assistance, free legal aid and scholarships for their dependents.

One local UAW official briefed on the talks said UAW Vice President Dick Shoemaker “told us ‘we’re saving jobs.’ That’s why we’re doing this.” Delphi is GM’s former parts operation; Visteon was formerly owned by Ford. Both suppliers make a wide range of auto parts, including steering systems and satellite radios.

This new deal does not affect current UAW workers at Delphi and Visteon, who are covered under the same 4-year UAW deal negotiated with GM, Ford and the Chrysler Group last summer.

UAW and company officials emphasized talks on the supplemental agreement to the 2003 contract were not complete and two or three issues were unresolved. However, a UAW official who talked to the Free Press and a document prepared by Delphi UAW Local 1866 in Wisconsin said UAW President Ron Gettelfinger assured UAW officials this wage and benefit package “would be included in the final agreement.”

Other details given to UAW officials indicated wages for future hires would top out at either $14.50, $16.50 or $18.50 per hour, depending on the job. A lower-level paying position would be something like a janitorial job, said a UAW official.

New hires will pay annual health-care deductibles up to $1,000 for an individual or $2,000 for a family. They also will pay 50 percent more for prescription drugs than current UAW workers at Delphi and Visteon.

Spokespeople for the companies declined to comment, other than to say that negotiations continue and that they are hopeful they will conclude soon. The UAW did not have any comment.

Top UAW officials have been holding meetings with local union leaders in recent days to discuss the status of negotiations for the supplemental agreement that will cover newly hired workers. Union members who work for the parts makers and their former parent companies authorized the negotiations when they ratified their own 4-year agreements last fall.

The new pact does not have to be voted on by UAW members, because the workers who would be covered by the agreement have not yet been hired.

UAW Vice President Gerald Bantam told the Free Press earlier this month that it would be important to explain the agreement with local union leaders. “They’re going to have to implement and deal with this,” he said.

A union source also said that defined-benefit pensions would be replaced by 401(k) retirement savings accounts, but a person who works for one of the companies disputed that characterization and said it wouldn’t be that simple.

The issue is of concern to current members.

“They’ve got no pension plan, which is huge,” said a Delphi UAW official who asked not to be named. “Will the next generation of workers at Delphi have any reason to support me and my pension when I retire? Of course not.”

This new UAW deal allows Delphi and Visteon to pay wages closer to its rivals at Lear Corp. and Johnson Controls Inc. and Asian suppliers such as Denso Corp. This, in turn, should help GM and Ford, which buy billions of dollars a year from the former parts operations.

Union and company officials have said they expect to have a deal by the end of this month. They were required to reach an agreement almost a month ago, but negotiations dragged on.

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