Delphis bankruptcy abuse challenged

While Delphi CEO Steve Miller has proposed in bankruptcy court to cancel labor agreements, slash the company’s hourly workforce by approximately 75 percent and phase in a wage cut from $27 an hour down to $16.50, it has sung a different song to its executives. As a reward for leading the auto parts manufacturer into bankruptcy, Delphi has asked the court for permission to give a group of executives hundreds of millions in salary and stock options.

In response to this, on April 6 Sen. Evan Bayh of Indiana and Rep. John Conyers of Michigan introduced a bankruptcy reform bill designed to eliminate abuse of the bankruptcy process, which has occurred not only at Delphi but also during other recent corporate bankruptcies.

The Fairness and Accountability in Reorganizations Act of 2006 (S 2556, HR 5113) would close some of the loopholes that have allowed executives at Delphi to reward themselves while slashing wages and benefits for working families. Management should not be allowed to enrich themselves on the backs of workers and retirees, said the United Auto Workers in a statement supporting the bills. The legislation faces an uphill fight in the GOP-run Congress, whose new bankruptcy law, approved last year, allowed Delphi execs to seek bonuses and extra pay.

This bill would require bankruptcy judges to take into consideration a company’s foreign operations, as well as its domestic ones, in ruling on motions to reject collective-bargaining agreements and retiree health benefits. This is important as Delphi has been increasing its overseas operations and now has 180,000 employees outside the U.S.

“Companies should not be allowed to shift resources and production to overseas operations, at the same time they are pleading poverty in an attempt to slash wages, benefits and jobs in the United States,” said a joint statement from Conyers and Bayh.

Yet another initiative is coming from Sen. Edward Kennedy (D-Mass.) and Rep. George Miller (D-Calif.). They are circulating sign-on letters that call on Delphi to provide workers, retirees and their communities with current and necessary financial information to show whether the company’s proposed wage and benefit cuts and facility closings are truly necessary and whether the proposed changes are being implemented in a gradual, humane manner that gives workers, retirees and communities the longest possible time to adjust.

The UAW is urging its members and the public to contact senators and representatives to press them to co-sponsor the Bayh-Conyers bankruptcy reform bill and to sign on to the Kennedy-Miller letter.