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Ripple effects likely in Delphi bankruptcy

ANN ARBOR, Mich. - Delphi Corp.'s bankruptcy could change the face of the U.S. auto industry, ratcheting up the pressure to produce cheaper auto parts overseas and forcing unprecedented cuts in union wages and benefits, industry analysts and autoworkers said Sunday.

Delphi, the largest U.S. auto supplier, filed for bankruptcy Saturday and is expected to slash jobs and wages and close many of its 31 U.S. plants as part of its reorganization. General Motors Corp., Delphi's largest customer and former parent, said it might have to assume up to $11-billion in retirement benefits for Delphi's union-represented employees.

But the ripple effects won't end there. Delphi has 500 suppliers of its own who are waiting to see what kind of labor agreement Delphi negotiates with the United Auto Workers. Once a leaner Delphi emerges from bankruptcy, expected in 2007, its suppliers could face added pressure to lower their own costs through wage cuts or increased use of overseas labor.

"There's a great deal of concern among auto suppliers about whether they can remain profitable or survive with union contracts," said Jim Gillette, a supplier analyst with CSM Worldwide.

Delphi's bankruptcy is one of the largest in U.S. history. The company, based in Troy, Mich., has 50,000 employees in the United States.

Despite Delphi's troubles, Gillette said there's still a future for auto suppliers in the U.S. market. Japanese, German and Korean automakers are moving parts operations here so they can supply their U.S. plants, he said, and while they may not be unionized, they often match union wages. Suppliers who produce parts that require a high level of skill and training also face less competitive pressure from overseas, he said.

[Last modified October 10, 2005, 04:49:10]