GM could be crippled if Delphi workers strike: Analysts

DETROIT — A looming strike by workers at struggling Delphi Corp. could shut down North American operations at the company’s largest customer, and former parent, General Motors.

According to a recent Reuters report, the United Auto Workers union said it would be “impossible to avoid a long strike” if a U.S. bankruptcy court grants Delphi’s request to reject unprofitable supplier deals with GM and void its current labor contracts. The company wants to implement massive wage cuts and come up with an incentive plan to lure workers into early retirement.

The Domino effect of a Delphi strike and
possible GM closure could be severe

The bankruptcy court will hear Delphi’s case in May and likely make a decision in early June.

According to Reuters, the UAW says that after Delphi’s appeal to the courts, “there is no further reason to continue discussions.” That hard line sparked fears in the automotive sector that the union is setting the stage for a long work stoppage.

If that happens, GM, which is currently trying to keep its own head above water in the face of high labor and raw materials costs, would be forced to shut down most of its operations at a cost of $1 billion a week — effectively putting the carmaker in bankruptcy as well.

A Delphi strike in 1998 halted about 95 percent of GM’s North American operations for nearly two months. GM spun off Delphi, which at the time was the carmaker’s parts division, a year later.

Automotive analyst Dennis DesRosiers says GM’s decision to spin off Delphi seven years ago is coming back to haunt them. ‘If (there’s a strike) there’s no easy way to solve it, so it will likely be a long and difficult one that will bleed GM,” he said.

DesRosiers said the Domino effect of a possible Delphi strike and GM closures could be severe across the balance of auto manufacturing, parts, and transportation sectors.

Competing suppliers and carmakers like Ford and Chrysler would find it difficult to compete with Delphi, and likely GM, which would be protected under radical cost restructuring plans. Eventually, says DesRosiers, the other two major auto companies and their suppliers could be forced into major restructuring plans of their own.

— with files from Reuters