General Motors chief executive Rick Wagoner has said that his company is discussing its top supplier’s weighty cost structure as it negotiates a bailout deal with Delphi and the United Auto Workers union, according to Dow Jones.
Go deeper with GlobalData
Discover B2B Marketing That Performs
Combine business intelligence and editorial excellence to reach engaged professionals across 36 leading media platforms.
“Their costs are approximately $4bn too high,” Wagoner reportedly said during a conference in New York. “Frankly the math is that simple. Their cost structure is way out of line.”
The news agency noted that Delphi, which filed for bankruptcy in October, is asking a bankruptcy court to void more than $5bn in existing supply contracts with GM due to terms that Delphi says are not competitive. At the same time, GM claims it pays about a $2bn price premium for Delphi parts due to the company’s high fixed costs and other competitive disadvantages.
Wagoner reportedly said discussions surrounding Delphi’s high costs, much of which stem from existing labour costs that Delphi inherited from GM when it was spun off from the automaker in 1999, are playing a role in ongoing negotiations aimed at bailing the supplier out. GM buys $14bn in parts from Delphi annually and is trying to forge a consensual deal with Delphi and the UAW in an effort to avoid a costly strike.
Dow Jones added that, in addition to trying to rework GM contracts under court protection, Delphi is looking to leverage bankruptcy in an effort to reduce its labour costs. It has filed a motion with the court to have its existing agreements thrown out, but GM, Delphi and UAW are working to forge an out-of-court settlement capable of pleasing all parties.
According to Dow Jones, Wagoner indicated the UAW is showing signs of understanding the challenges facing Delphi and GM in ongoing discussions. He said the posture of the union leadership indicates GM can negotiate labour terms for Delphi, and eventually for GM, that will help the struggling companies become more competitive.
