Troubled auto parts maker Delphi Corp. asked a bankruptcy judge Friday to void its union contracts so it could slash hourly wages as part of a sweeping reorganization plan that would eliminate two-thirds of its U.S. factories and cut 8,500 salaried jobs worldwide.
Delphi also asked the judge to cancel hundreds of unprofitable contracts with General Motors Corp., its biggest customer and former owner.
Several analysts and bankruptcy specialists likened the parts maker's maneuvers to the start of a high-stakes game of chicken -- with Delphi's recovery and GM's future at stake.
"Now the clock is ticking," said Sean Egan, auto industry analyst at Egan-Jones Ratings in Philadelphia. Delphi Chief Executive Steve Miller "is doing exactly what he needs to do" in forcing the issue by asking the Bankruptcy Court to step in.
Hearings on Delphi's motions are scheduled for May 9 in U.S. Bankruptcy Court in New York. The judge has as long as 30 days from the end of the hearings to rule.
"The timing gives both parties plenty of time to negotiate, and there will be a lot of brinkmanship going on," said New York bankruptcy attorney Jay Waks.
Delphi will continue negotiating with its unions and GM, but Miller insisted that the parts maker could not afford its current wage and pension costs or to continue supplying GM under contracts that force it to "sell products at a loss."
Delphi has proposed slashing hourly wages by 40%, freezing its pension plan and closing unprofitable plants as part of its plan to emerge from bankruptcy.
United Auto Workers President Ronald Gettelfinger called Delphi's motion a "misuse of bankruptcy procedure to circumvent the collective-bargaining process."
Analysts said Delphi's longexpected action could eventually trigger a strike that could force GM itself to file for bankruptcy.
The automaker, which lost $10.6 billion last year and is suffering from a decades-long sales slump, depends on the electronic components, interiors, steering and brake systems and other crucial parts Delphi provides.
The UAW has pledged to strike Delphi plants if its contracts are thrown out. If that happened, GM in turn would be forced to shut assembly lines within 48 hours, said Sean McAlinden, an analyst with the Center for Automotive Research in Ann Arbor, Mich.
