Originally created 10/11/05

Delphi bankruptcy could hurt GM talks



DETROIT - General Motors Corp. has been negotiating with the United Auto Workers for months in an attempt to lower its skyrocketing health care costs, but those talks could be jeopardized by Delphi Corp.'s bankruptcy, analysts said Monday.

Uncertainty over GM's situation caused its shares to fall $2.81, or nearly 10 percent, to close at $25.49 on the New York Stock Exchange. Shares of auto supplier Delphi, which filed for bankruptcy Saturday, fell 76 cents to close at 36 cents.

Standard & Poor's Ratings Services also lowered GM's credit rating one level deeper into "junk" status Monday, from BB to BB-, a move that could make it harder for the struggling automaker to borrow money.

GM, which is Delphi's former parent and largest customer, will likely face price increases from Delphi and is at risk of disrupted supply if there is labor strife at Delphi plants, S&P said.

GM and the UAW have been talking since early spring about ways to cut GM's annual health care bill, which will grow to $5.6 billion this year.

GM has suggested, among other measures, that hourly workers should pay as much for their health care as salaried workers do. The UAW has said it will consider some ways to help GM, but it won't reopen its contract with the automaker, which is scheduled to expire in September 2007.

Some industry analysts said the union might be less willing to make concessions to GM now because the automaker didn't prevent Delphi from declaring bankruptcy, putting the supplier's 24,000 UAW-represented hourly workers at risk of massive pay cuts.

GM spun off Delphi in 1999 but left it with high labor costs, and the supplier is expected to seek cuts in wages and health care during its restructuring. A recent letter to union members said Delphi wants to cut its $27 hourly wage by as much as 60 percent. Any contract changes must now be approved by the bankruptcy court.

Delphi's future


WHAT'S HAPPENING NOW


Standard & Poor's Ratings Services and Fitch Ratings both lowered Delphi's credit rating deeper into "junk" status Monday. They cited the bankruptcy and Delphi's high labor costs.

What's next


- Today: Hearing scheduled in U.S. Bankruptcy Court in New York


- Monday: Organizational meeting for unsecured creditors in New York


- Oct. 21: Delphi has told the court it might provide the United Auto Workers and other unions with proposed changes it wants in their contracts.


- Dec. 16: Delphi plans to file a motion rejecting union contracts if the unions haven't agreed to and ratified changes and plans to eliminate retiree medical and life insurance for union-represented retirees.


- Jan. 17: Delphi has proposed a court hearing on its motion.


Source: Filings with U.S. Bankruptcy Court