Tense negotiations continue between the United Autoworkers Union (UAW) and parts maker Delphi, as the latter tries to emerge from bankruptcy. Reports are that the UAW is finalizing a revised offer to Delphi that includes some minor concessions, but many think the proposal will not be enough to get a deal done.

Last year, Supply Chain Digest observed that the situation between the UAW and Delphi, whose hand is strengthened in union negotiations as it remains under the control of the bankruptcy court, was a microcosm of the overall U.S. labor situation. The lofty wages of U.S. autoworkers and some other unionized industries may be a thing of the past, as the realities of a global economy and competition for manufacturing work in low cost countries effects even strongly unionized industries. (See:  Delphi, the UAW and the Impact on Supply Chain Management for Everyone)                                                                                 

For example, the UAW has already agreed to a two-tiered wage system at Delphi, with new hires starting at just $14 per hour, with a so called “all-in” cost of about $25 per hour, including benefits. This all-in cost would grow to about $42 an hour by 2011. That compares to previous agreements where the hourly wage was $25 and total costs were over $70 an hour.

It is possible that Delphi will ask the bankruptcy court to allow it to cancel the current union contract. While that looked likely at earlier points, the fact that the existing contract expires in September may make that specific option moot. At least one private equity company considering buying Delphi and taking it out of bankruptcy is insisting the UAW make even greater concessions than the two-tiered agreement already in place.

It is believed the UAW proposal will make a few concessions, but not to the level sought by some within Delphi and the potential private equity investors.

Meanwhile, it is still possible that GM could be asked to shoulder some of the burden to help avoid a strike at its largest part supplier. GM spun off the then company-owned parts business a number of years ago, but which is contractually on the hook for some of its labor costs, and is by far Delphi’s largest customer. With its own operations ailing, GM needs a strike or added costs like a hole in the head. GM has its own contract negotiations with the UAW this summer.

The Wall Street Journal quotes an unnamed UAW official as saying, “This will be a non-negotiable last offer. If Delphi can’t live with it, then they should go ahead and file their motion to void our contracts and let’s go from there.”

It’s going to get ugly, we predict.