Bankrupt auto parts maker Delphi Corp. Monday said it could not reach a deal with General Motors Corp. to extend parts pricing relief the U.S. automaker gave its former unit late last year.
Last November, GM agreed to put off contractually agreed to price reductions for Delphi parts through the first quarter to give Delphi relief while it negotiated wage and benefit cuts with unions that represent most of its U.S. hourly workers.
However, on March 31 Delphi filed court papers seeking authority to reject its U.S. labor contracts and thousands of unprofitable contracts to supply GM with parts. Hearings on both requests are scheduled to start later in May.
“It is understandable that if Delphi wants to throw out contracts that GM would enforce the terms of the contracts as agreed,” Fitch Ratings Managing Director Mark Oline said.
Parts pricing discussions necessarily follow a resolution to Delphi’s labor costs, Oline said.
Delphi said in a federal regulatory filing that as of April 26, the companies could not agree on terms to extend the November agreement and net sales would begin to reflect price reductions as of April 1.
Delphi, which filed for Chapter 11 protection for its North American operations last October, gave no dollar value for the price reductions GM put off enforcing in November or the amount they would cut into sales starting with the second quarter.
There is no time frame for either rejecting the GM contracts or the labor agreements and talks continue between all parties, a Delphi spokeswoman said on Monday.
In addition to its motions on labor agreements and the GM contracts, Delphi in March said it planned to cut up to 8,500 salaried workers and close or sell a third of its plants globally to slash costs and restructure its operations.
Delphi has said that steep wage and benefit cuts for hourly workers in the U.S. and significant cuts in facilities are key to its plan to emerge from bankruptcy protection in the first half of 2007. Ultimately, Delphi expects to cut 27,000 of its 33,100 U.S. hourly workers by the end of 2010.
The unions have objected to Delphi’s cost-cutting proposals, and its motion to void contracts, and have threatened to strike Delphi if contracts are tossed out.
A strike could quickly shutter Delphi and cripple production within days at GM, which spun Delphi off in 1999.
Delphi’s reply to the union objections is due on Monday with the U.S. Bankruptcy Court in New York.
Unions represent nearly all of Troy, Michigan-based Delphi’s U.S. hourly workers. The United Auto Workers represents about 24,000 workers, the International Union of Electrical Workers-Communications Workers of America cover about 8,500 and other unions represent a handful of workers.
Separately, Delphi filed an amended report with the U.S. Securities and Exchange Commission that cut year 2000 net income by $69 million to correct an accounting error.