Cerberus Capital Management LP might drop a planned $3.4 billion investment in troubled auto-parts supplier Delphi Corp. because the United Auto Workers union is resisting Cerberus’ proposals for pay cuts, three people familiar with the situation said Friday.
Cerberus has been negotiating with the union after agreeing last month to lead the investment in Delphi. David Thursfield, who heads Cerberus’ automotive unit, set out his demands to UAW Vice President Cal Rapson in a meeting in Detroit on Thursday, one of the people said. Thursfield is scheduled to meet with UAW leaders again Monday.
If the talks stall, Troy, Mich.-based Delphi might ask a U.S. bankruptcy judge to scrap the union’s contract. The union has threatened to strike if the request is granted, leaving General Motors Corp., Delphi’s biggest customer and former parent, without car parts.
“Thursfield’s always been a hard case,” said Sean McAlinden, an economist at the Center for Automotive Research in Ann Arbor, Mich. “If he sees a business that just can’t make it at all, he’s going to say it’s a bad deal. He won’t do it.”
Before voiding contracts, U.S. Bankruptcy Judge Robert Drain in New York is likely to give the sides a final chance to reach a settlement, McAlinden said. Drain approved the bid by Cerberus and four other financial firms on Jan. 12.
Spokesmen for Delphi, Cerberus and the union all declined to comment. GM won’t comment on specifics of the Delphi talks, spokeswoman Renee Rashid-Merem said. “We’re still hoping for a mutually beneficial agreement for all parties,” she said.
Thursfield, 61, a former Ford Motor Co. executive, began talks with the UAW about his bid to take control of Delphi on Jan. 8. Cerberus wants to finish it by the end of this month.
His main counterpart is Rapson, 62, the UAW vice president for GM and Delphi bargaining. Ron Gettelfinger, 62, the union’s president, makes final decisions on the union’s bargaining strategy.
The biggest issue for Cerberus is the UAW pay scale, the people said. Currently, skilled trades workers at Delphi receive wages and benefits worth $75 an hour.
