It’s Monday, Oct. 17, the day new regulations in the federal bankruptcy code make it tougher to file Chapter 11 protection from meeting creditor obligations. In corporate parlance, “creditors” include union workers’ contracts and pension-fund obligations. Guess which creditors will get the squeeze from the now bottomed-out Delphi Corp?
Filing papers under the wire, Delphi Corp., the nation’s largest auto-parts company, and ranked 63rd on the Fortune 500 list, asked for bankruptcy protection Oct. 9. It blamed high labor costs from its unionized workers in the U.S. for its incapacity to compete with more cost-conscious (read low-paying) foreign rivals. The solution it sought, a new deal with the United Auto Workers containing mammoth labor concessions, was rejected by the union. The Troy, Mich.-based parts giant now wants the deal resurrected, and this time imposed by the court.
How huge are the demanded givebacks? The oracles at Delphi want to end health and life insurance for its roughly 12,000 American retirees while cutting the wages of its 35,000 hourly U.S.-based workers by some 67 percent. That means driving wages down to $10 an hour. Now THAT’S a deal worth complaining about.
To get some perspective on just how bad is the proffered deal, consider that mass-production-auto pioneer Henry Ford paid his production workers $5 a day in 1914, . It was considered good money at the time. Adjusting that $5 a day for inflation, a wage of $10 per hour today would be just $4.76 per day in 1914. So much for a century of progress.
As economist Paul Krugman noted this morning, “If Delphi slashes wages and defaults on its pension obligations, the rest of the auto industry may well be tempted — or forced — to do the same. And that will mark the end of the era in which ordinary working Americans could be part of the middle class.”
Restraints on keeping ordinary Americans from falling into poverty is not one of the “parts” Delphi manufactures or prizes. Robert S. Miller, its new chairman and chief executive officer, said, “We took this action because we are determined to achieve competitiveness for Delphi’s core United States operations. We simply cannot afford to continue to be encumbered by high legacy issues and burdensome restrictions under current labor agreements that impair our ability to compete,”
Note the Aesopian language: Paying workers a fair wage is, in the vocabulary of corporate newspeak, a “high legacy issue”, and a mutually agreed-to union contract becomes a “burdensome restriction.”
According to The Washington Post, Delphi listed $17.1 billion in assets and $22.2 billion in debt in its bankruptcy filing. Delphi also had $4.3 billion in unfunded pension liabilities, some of which may have to be picked up by the federal Pension Benefit Guaranty Corp. — read the taxpayers.
Delphi employs 185,000 workers worldwide, and just 32,000 workers in the US, of whom a mere 24,000 are UAW members. While looking to eviscerate workers’ wages, it continued paying dividends until last month. In China, it pays its workers the equivalent of $3 per hour, though it also throws in lunch and bus transportation to and from work.
Delphi even uses Bizzaro-world math to exaggerate its total current U.S. compensation package per worker, placing it in the ruinous $125,000 to $130,000 per year range. Contradicting the figure, Dean Baker of the Center for Policy and Economic Research notes that
“this measure includes all labor costs incurred by Delphi, including costs for providing wages and benefits to laid off workers and retirees, averaged over the number of active employees at Delphi. While workers at Delphi receive substantially more pay and better benefits than most workers in the United States, only about half the sum mentioned in this article actually refers to wages or benefits seen by current workers.”
While the new-broom Miller hopes to sweep out union standards, he has already, “sweetened severance packages available to its top 21 executives, a move the company said was necessary to retain its newly assembled management team,” reported The New York Times.
UAW President Ron Gettlefinger said, “Once again, we see the disgusting spectacle of the people at the top taking care of themselves at the same time they are demanding extraordinary sacrifices from their hourly workers, engineers, administrative and support staff, midlevel managers and others.”
In fairness, Delphi Corp. announced today that Miller, brought in just three months ago to turn the company around, “will reduce his salary to $1 per year, effective Jan. 1, 2006, and continuing until Delphi successfully emerges from its reorganization in Chapter 11. In addition, the Delphi officers who were at Delphi at the time when Miller joined the company, volunteered to waive 10 percent of their base pay, 20 percent in the case of President Rodney O’Neal, to be effective Jan. 1, 2006. That’s magnanimous, considering Miller’s predecessor, J T. Battenberg, earned $6,287,384 in total compensation in 2004, including stock option grants., according to the AFL-CIO’s Paywatch.
Offering a proactive solution to the auto industry’s fiscal woes, Gettelfinger repeatedly calls for a national health care system as a way to lessen the financial burden on Detroit automakers. That’s something automakers have not joined in supporting.
Delphi likes to talk about the “cocoon of safety” its parts products provide drivers. What got birthed from this bankruptcy chrysalis is no butterfly. More like a vampire bat.
Michael Hirsch is a staff writer for the New York Teacher, the newspaper of the United Federation of Teachers. This article appeared on Edwize, the UFT blog, on Oct. 17, 2005.