Delphi action may imperil GM

DETROIT — Delphi Corp. seems likely to ask a bankruptcy judge on Friday to cancel its labor contracts, analysts said, with heavy consequences for the auto industry including pushing its largest customer, General Motors Corp., closer to Chapter 11 bankruptcy.

Delphi, the largest auto parts supplier in the U.S., first threatened to ask a bankruptcy judge to cancel its union contracts in December but has delayed that action three times so it can continue talks with its unions and GM, its former parent. Delphi’s latest deadline to act is Friday, and spokesman Lindsey Williams said Wednesday that, so far, the company is sticking to that deadline.

“We are holding out that something might develop,” Williams said. “We are remaining hopeful that we can come up with a resolution prior to the 31st.”

But a resolution appears unlikely. GM spokesman Jerry Dubrowski said Wednesday the automaker hasn’t settled with Delphi on a wage proposal. GM’s agreement is critical, because Delphi is depending on GM to supplement its wage offer and offer one-time payments of $50,000 to Delphi workers if they accept wage cuts.

Delphi’s two largest unions — the United Auto Workers and the International Union of Electronic Workers-Communications Workers of America — also have spoken out against Delphi’s latest proposal, which calls for lowering workers’ wages from $27 an hour to $16.50 an hour in 2007.

Goldman Sachs analyst Robert Barry said Wednesday that Delphi is more likely than not to ask a judge to void its contracts Friday.

“We feel it is hard to envision GM and the UAW reaching an agreement on the outstanding issues without the added pressure the contract cancellation process would bring,” Barry said in a note to investors.

If Delphi asks the bankruptcy court judge to void its contracts, the company wouldn’t immediately face organized strikes. Judge Robert Drain has scheduled a May 8 hearing on Delphi’s request and wouldn’t decide whether to void Delphi’s contracts until after that hearing.

But if Drain does agree to void Delphi’s contracts, the electronics workers’ union already has authorized a strike, and UAW members could authorize one as well. Meanwhile, some workers may participate in unauthorized strikes or work slowdowns, according to Gregg Shotwell, a UAW-represented machinist at a Delphi plant in Coopersville.

Delphi provides parts to every major automaker. In its most recent annual report, Delphi said Ford Motor Co., DaimlerChrysler AG, Nissan Motor Co. and Volkswagen AG all bought more than $850 million in parts.

But a strike would have the most devastating consequences for GM, which buys about $14 billion in parts from Delphi annually, including air bags, brakes, steering and climate control systems, satellite radio and on-board navigators.

In a note to investors Wednesday, Merrill Lynch analyst John Murphy estimated a strike would cost GM $7 billion to $8 billion in the first 60 days. GM has around $20 billion in cash on hand, so a lengthy strike could send the automaker into bankruptcy.