GM - Delphi UAW Deal

UAW Reaches Deal with Delphi

Late last week, the UAW officially reached a buy-out deal with Delphi and General Motors. In the deal, almost all UAW members with under 26 years seniority would be offered a buy-out: cash from $40 to $140,000. In exchange, the worker would have to give up the right to all benefits except for vested retirement. Workers with over 26 years could retire with full pension and vested benefits.

The UAW represents about 22,000 of Delphi's 30,000 workers. If all of the UAW members would take the deal, and assuming the payout averaged $100,000, the deal would cost GM a cool $2.2 billion. All of the workers will not take the deal, but this shows you the order of magnitude of the GM cash outlay. Although $2.2 billion is a lot of money, that's about how much GM paid for the privilege of not buying Fiat, and the Delphi deal is a lot more critical to GM's immediate vitality.

As far as Delphi is concerned, even if it can check the UAW buyout off its list, it still has about 8,000 workers represented by other unions. It is unlikely that GM or anyone else will subsidize buyouts for these workers who are likely to demand a similar deal. Delphi will still have to come up with some cash to assure labor peace. Delphi wants to close 21 of its 29 US plants.

Finally, the buyout deal does not include agreement on a new contract. Delphi has proposed a gradual lowering of hourly pay for UAW workers from $27 to $18 per hour IF GM subsidizes the wages. If GM does not subsidize the wages, the offer on the table is reduction down to $12.50 per hour. Delphi hopes that the buyout will rid the company of the "troublemakers" (my term) who would make waves and stand in the way of wage cuts.

For UAW Delphi workers, a few things are clear: If you are to have any hope of retaining a UAW job with a high wages, your only possibility is a flowback to General Motors. Delphi will dissolve or be destroyed before it will pay the accustomed wage. The decision the workers have to weigh when deciding to take the buyout or holdout and (at least threaten to) strike is whether the UAW has the power to force Delphi to pay (and whether Delphi has the capability to pay) something close to half way between the current wage and the current offer. Personally, I doubt that Delphi can pay it. It seems to me, therefore, that the average Dephi worker will be better off taking the buyout and taking his/her chances in the job market. Even with taxes, a $140,000 buyout could subsidize your wages $20,000 per year for at least 5 years. If you can't change your lifestyle within 5 years, then you're not trying too hard. If you have a special circumstance, such as a pre-existing medical condition that makes maintaining your insurance crucial, then you're going to have to just suck it up and take less pay.