Study: Delphi reorganization will cause billions in lost wages, auto output | VailDaily.com
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Study: Delphi reorganization will cause billions in lost wages, auto output

DETROIT – Auto supplier Delphi Corp.’s reorganization could cost workers and auto companies at least $10 billion in 2007, and far more if the company hasn’t emerged from bankruptcy protection by then, according to a study released Monday by an economic consulting firm.Delphi, one of the world’s largest auto suppliers, has 50,600 U.S. and Canadian workers and 45 manufacturing plants in 16 states. The company filed for bankruptcy protection in early October, citing high labor costs.The study, by East Lansing-based Anderson Economic Group, is one of the first to estimate the economic effect of the company’s reorganization. It examined several possible scenarios, from a best-case re-emergence as a leaner company in mid-2007 to partial liquidation if Delphi fails to come out of bankruptcy protection.”Unfortunately, a soft landing is no longer possible,” said Patrick Anderson, the author of the study and founder of the Anderson Economic Group. “Even our optimistic scenario envisions a reduction in employment of over 12,500.”Delphi had no comment on the study, spokeswoman Claudia Baucus said.If Delphi successfully reorganizes by mid-2007, U.S. and Canadian workers would lose an estimated $2.1 billion in wages and benefits, the study said. That assumes the average hourly worker would make $14 an hour, down from $27 an hour now.So far, Delphi and its unions haven’t agreed on a new wage rate. According to a memo circulated by local union members, Delphi is asking the United Auto Workers and other unions to cut base wages to $9.50 to $10.50 an hour. Caroline Sallee, a senior analyst with the Anderson Economic Group, said the authors believed that rate was too low and that unions will negotiate a higher rate.The study also assumes that in the best-case scenario, Delphi would close at least 10 plants and employment would fall from 50,600 workers to 37,950 workers. Almost three-quarters of the workers cut would be hourly workers, the study said.Delphi hasn’t yet said how many plants it might close, but the company has placed 10 unprofitable plants in their own unit, and the study assumes Delphi would sell or close those plants in 2006. Four of the plants are located in Ohio. The rest are in Alabama, Indiana, Georgia, Michigan, Mississippi and New Jersey.Auto manufacturers would lose an estimated $4.7 billion in 2007 because they’ll have to reduce output if they haven’t found replacement suppliers for some Delphi parts. Smaller companies that supply parts to Delphi would lose an estimated $3.3 billion in sales, the study said.Delphi’s reorganization could directly cost taxpayers $4.8 billion because of lost income taxes and tax revenue and a shift in pension funding from the company to the federal government.—On the Net:Anderson Economic Group: http://www.andersoneconomicgroup.comDelphi Corp.: http://www.delphi.com


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