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By Tom Brown
DETROIT, Sept 17 (Reuters) - General Motors Corp. and the United Auto Workers were locked in contract talks on Wednesday, as a snag over GM's former auto parts unit Delphi Corp. kept it from reaching an agreement like cross-town rivals Ford Motor Co. and Chrysler.
"Talks continue," said GM spokesman Pat Morrissey. "There are negotiations going on."
Existing labor contracts between Detroit's Big Three automakers and the UAW, covering more than 760,000 current and retired workers and their spouses, expired on Sunday.
The talks for new four-year contracts come amid dwindling profits at the Big Three, slipping market share and record-high incentives.
Delphi was spun off from GM in 2000, and under the terms of that agreement, it is subject to GM contract terms in the 2003 deal as well. Union sources said GM and Delphi were seeking to match or improve on a deal under which Visteon Corp. , a former Ford unit, will be able to hire new workers at sharply lower wages than existing employees.
Despite the delay, the union has not talked about striking.
The deals with Ford and the Chrysler arm of DaimlerChrysler AG call for plant closings, thousands of job cuts and bigger co-payments for prescription drugs, in exchange for modest pay hikes and signing bonuses, according to company and union sources.
AGING PLANTS, MOUNTING COSTS
The UAW reached the tentative deal with Ford and Visteon late on Monday. Ford Chairman Bill Ford Jr. said the agreement dovetailed with plans to close four U.S. plants and cut jobs to return to sustainable profitability. Assembly plants in St. Louis and Edison, New Jersey are both on a closing list.
The union's tentative deal with Chrysler, announced just past the midnight deadline on Sunday, will allow the automaker to sell or close up to seven underperforming U.S. auto parts plants over the next four years and cut 9,000 or more jobs, sources familiar with the agreement told Reuters.
GM has not revealed any plans to cut factory jobs, but it also has several aging and inefficient facilities, including vehicle assembly plants in Linden, New Jersey, and Baltimore that operate on just one shift.
"We expect that GM will be able to close two assembly plants over three years in return for severance payments," Merrill Lynch analyst John Casesa said in a research report.
GM shares fell 19 cents to $41.69, while Delphi rose 3 cents to $9.71 in morning trade on the New York Stock Exchange. Ford slipped 8 cents to $11.55, DaimlerChrysler rose 14 cents to $38.34 and Visteon gained 1 cent to $6.98, all on the NYSE.
Casesa said he expects Delphi, the world's largest automotive parts supplier, will win union approval to close or sell some of its underperforming facilities. Delphi has identified plants at eight U.S. sites with about 10,000 UAW workers that it has said need to be sold, fixed or closed to compete.
The deals with Chrysler and Ford call for roughly a doubling of blue-collar co-payments for prescription drugs and lower company contributions to pension plans for hourly workers and more modest pay increases.
Instead of the 3 percent annual pay hikes in the previous contract, the new deal includes a signing bonus of $3,000 for workers, a lump sum payment in the second year, and wage hikes of 2 percent and 3 percent in the third and fourth years, union and company sources said.
The hefty $3,000 signing bonus helped offset the lower pay raises, which automakers prefer because pay hikes are used to determine pension benefits, analysts said.
The automakers have been burdened with mounting pension and health care costs, particularly for their retired workers and spouses. Their German and Asian competitors have hardly any retired workers at their North American plants.
"Key to the agreement for the union was preserving long-term benefits in the form of pension and health care and key to the companies was getting the flexibility to close plants and eliminate jobs," Bear Stearns analyst Domenic Martilotti wrote in a report. "We believe that both of these criteria were largely met." (Additional reporting by Michael Ellis, Justin Hyde)