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Delphi In Trouble; Asking Union for more than 50% pay cuts
Topic Started: Oct 7 2005, 08:38 PM (304 Views)
tomdrobin
Member
I have been hearing today, that the auto supplier Delphi is in big trouble. And, is demanding their union workers take a pay cut from an average of $27 per hour to $12 per hour and give up many benefits. They also want to drop the "jobs bank" program, whereby employees not needed still get paid to do community service and other jobs. This is part of the industry wide job guarantees that the UAW fought hard for and won in previous contract settlements.

Delphi is the automotive parts supplier that used to be part of GM, and was "spun off" in the hopes it would become more competitive with other suppliers on it's own.

The companies president has stated that if the union does not agree, they will file for bankruptcy in 4 days. In six days new bankruptcy rules take effect that make it more difficult to do so. Analyst predict the workers are between a rock and a hard place, and will surely fair worse if the company goes bankrupt.

Sound to me like the goose that laid the golden eggs is near death.

I wonder if GM and Ford, and Visteon (which was formerly Ford's supplier arm) won't be going through similar upheavels, as they all have similar union contracts.
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cmoehle
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Chris - San Antonio TX
Likely. And likely these corporations will be the ones blamed for being greedy. After all they have given? People have a right to join unions, just as they have a right to form corporatioons, but here, if they refuse, is where they go bad and take down everything with their greed.
Politics is the art of achieving the maximum amount of freedom for individuals that is consistent with the maintenance of social order.
--Barry Goldwater
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tomdrobin
Member
My wife and I were discussing it this evening. She remarked, that most of the employees have mortages, car payments, bills etc. based on the $27 per hour wage. It will mean a big change of life style for them to make less than 1/2 that. I feel sorry for them. But, in a way it reminds me of the entitlement mentality of those who demand ever more from the government.

They have deluded themselves into thinking they deserve over 2X the national average industrial wage for unskilled labor, and have rationalized they should be payed full pay and benefits, even if no work is available. The only way that could be sustained is to sell lots of overpriced products. But, competition has ended that option.

The industry should have taken a stand on this years ago, but was reluctant to take on the union because of the drastic economic consequences. Now facing fierce competition from international competitors they will have no choice.
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roscoe
Member
This will be a good way to curb government spending and the excessive salaries the corporate execs make.

I wonder if these reductions in salaries and cutting of benefits will lower the cost of the products manufactured.
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kajtek1
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Kris, CA
The fact is, that the labor wasn't worth $27/hr.
What can I say. If someone is betting his/her life on fiction.
I am planning to hit the jackpot in Vegas on Sunday.
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Fr. Mike
Member
From airline to teamster truckdrivers to union grocery workers--the golden age of above skill pay has ended.

It is unfortuante that this bomb gets dropped in the lap of a family who has no other current game plan. But--people generally live beyond their means.

$27 hr. = $216 per day = $1,080 per week = $56,160 per year.

Now add the vacation, sick pay, pension and health insurance.

$12 hr. = $96 per day = $480 per week = $24,960 per year

Benefit=?

If the employee shops his skills around the community, he should be able to determine if the new pay scale is normal for his skill level or not.

He now must make a decision which direction he needs to go. Starting over by getting new training may be the solution. Wishful thinking is not going to change the facts.
A humble servant of the Lord Jesus Christ

Don't forget to say your prayers!
The unborn have rights too.
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corky52
Member
Lots of new cars that won't be sold! Sooner or later the drag down will reach critical mass and the U.S.A. won't be a market anymore. I hope all of you are rich and have your ducks lined up. Make sure you budget for the guard services and security systems.
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cmoehle
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Chris - San Antonio TX
Kris "Shall I buy Royce-Rolls tomorrow?"

But it's the American way, isn't it?


The Outstanding Public Debt as of 08 Oct 2005 at 09:54:48 AM GMT is:
$ 7 , 9 8 3 , 5 7 7 , 2 5 1 , 5 6 7 . 6 4

The estimated population of the United States is 297,374,163
so each citizen's share of this debt is $26,846.91.

The National Debt has continued to increase an average of
$1.62 billion per day since September 30, 2004!

The US National Debt Clock
Politics is the art of achieving the maximum amount of freedom for individuals that is consistent with the maintenance of social order.
--Barry Goldwater
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Peralko
Member
You always hear about management demands of lowering worker wages. I have yet to hear of any management demanding lower salaries for company executives! On the contrary, executive salaries keep increasing, regardless of how companies are doing.
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puli-one
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Member
Update;
Auto Supplier Delphi Files for Bankruptcy
http://abcnews.go.com/Business/wireStory?id=1196466

Don & Donna
Puli Pup - Kelly
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bikemanb
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Liberal Conservative
Who agreed to these large wage and benefit packages? Wasn't management I guess just those evil workers.

Having worked at one time for a large manufacturing organization, here is the way it worked, at least there. Business slow, inventory large ..... lonnnng strike, Business booming, inventory normal or short ..... give'em whatever it takes to get'em off the picket line. I never considered this good business but the guys make seven figures know more than me.

And as Perk mentioned, are the execs at Delphi taking 50% cuts also? I doubt it.

One company I worked for had a bonus system for execs, when the year went bad the board restructured their bonus plan to reflect the bad year....they got bigger payouts than under the other plan because, "they did so well in a down economy". Yet we lost money and others in our market sector didn't....go figure.

I have been in engineering, management and sales my entire career so I have many issues with some of the things unions do, but don't assume that poor management is not just as much of Delphi's problems as those "greedy" workers.
Bill, Rita and Chloe the Terror Cat

For having lived long, I have experienced many instances of being obliged, by better information or fuller consideration, to change opinions, even on important subjects, which I once thought right but found to be otherwise.

Benjamin Franklin
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roscoe
Member
The old wages, retired medical costs and pension plan trick. I heard that the turnaround expert Miller who came out of retirement to help gave the remaining execs a bonus to stay on with the company until it's solvent again.

I wonder how much of a bonus they will end up with before the company finally goes pork.
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puli-one
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Member
Second Update:
At the present wage scale I don't see how they can hope to stay alive -

http://www.nytimes.com/2005/10/10/business....html?th&emc=th

(sorry still can't make the darn thing clickable)
Don & Donna
Puli Pup - Kelly
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puli-one
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There appear to be some serious ramifications to the Delphi filing, is it possible it could trigger the collapse of GM in 2007 -

http://www.nytimes.com/2005/10/11/business....html?th&emc=th
Don & Donna
Puli Pup - Kelly
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Fr. Mike
Member
This is interesting. Could it be that the auto manufacturers are the next sector to request relief or go bankrupt?

It does appear that the day of high wage and benefit jobs in the manufacturing sector are setting below the horizon.

Without the high wages, how is the economy going to avoid a collapse? Today I read that 2/3 of our economy is consumer spending.


Delphi Chief Sees GM Bankruptcy Without U-Turn on Wages, Health

Oct. 11 (Bloomberg) -- Delphi Corp. Chief Executive Officer Steve Miller said General Motors Corp., his biggest customer, will have to file for bankruptcy if it can't wrest wage and benefit concessions from the United Auto Workers union during their next contract talks.

Miller took Delphi, the largest U.S. auto-parts supplier, into bankruptcy after he couldn't get financial aid from GM and was unable to persuade the UAW to cut pay for long-time workers by as much as 64 percent to as little as $10 an hour.

``If GM comes out of 2007 with a labor agreement that looks like what today's agreement is, they are inevitably headed toward Chapter 11,'' Miller said in an interview yesterday.

Three days after filing the biggest manufacturing bankruptcy in U.S. history, Miller, 63, outlined what he described as a pivotal point for U.S. industrial society. Delphi's dilemma is ``simply a flashpoint and a test case'' for this crisis, said Miller, who has steered auto companies, steelmakers and airlines through bankruptcies over the past two decades.

The very existence of GM, Ford Motor Co. and many Detroit- area auto suppliers is threatened by the steady increase in wages, health-care costs and pensions that the United Auto Workers union has won for its members since 1947, he said. Retirement costs were manageable when workers retired at age 65 and died five years later; they're debilitating to companies when workers retire at 50 and live 40 more years, Miller said.

Miller, who became Delphi's CEO on July 1, said he doesn't expect GM and Ford to go bankrupt after 2007 contract talks, predicting the UAW will accept fewer jobs and smaller wages and benefits. The alternative, he said, would be for the UAW to cripple GM and Ford, where most of its highest-paid members work.

Who Will Buy Cars?

He called on government, labor and business leaders to collaborate on creating a ``new deal'' on health care that wouldn't concentrate both costs and risks on individual companies, particularly when workers themselves are opting to switch employers more frequently.

``High wages didn't just drop out of the sky,'' said Harley Shaiken, a labor professor at the University of California at Berkeley. They reflected ``companies that made a lot of money while they were paying them. The fundamental question is still who's going to buy the cars. If autoworkers can't do it, who exactly is going to have the purchasing power to promote demand- led growth?''

Still Negotiating

Separately, GM and the UAW are still negotiating on the automaker's demand that blue-collar workers make out-of-pocket health-care payments closer to those of salaried workers. GM believes it has a legal right to cut health care for retirees without the union's consent, but still hopes the union will agree, Miller said.

Salaried workers at GM pay 27 percent of the cost of their health-insurance costs, compared with 7 percent for UAW members, said Toni Simonetti, a GM spokeswoman.

Simonetti declined to comment on 2007 contract talks. She confirmed that GM is still talking to the UAW about trimming health costs. ``Our strong preference is to do so cooperatively with the union, but we need to get this done one way or the other,'' she said.

``Speculation on what may or may not happen with our UAW contract is way premature,'' said Jon Pepper, a Ford spokesman.

Right Idea

GM had the right idea when it spun off Delphi in 1999, Miller said. The automaker had reduced its labor and wage costs while seeding a new company with ``sophisticated technologies'' to keep new products flowing to the automaker.

Problems arose as a decline in GM's North American production reduced revenue, leaving Delphi unable to cover the high union wages it inherited from the automaker. GM, having cut production, couldn't take back excess workers from Delphi as planned. That left Delphi saddled with 4,000 idled workers that it had to pay under contract.

Delphi's bankruptcy stems from ``the fundamental problems that have crippled the domestic auto industry: an inflexible and uncompetitively expensive labor union, along with a toxic relationship between automaker and supplier,'' said Credit Suisse First Boston analyst Chris Ceraso said in a research note.

GM, Ford and DaimlerChrysler AG's Chrysler unit, the three biggest U.S. carmakers can no longer cover ``premium wages'' because they are being undercut by the Asian and European rivals that are paying workers less in their U.S. plants, Miller said.

``There is now such a critical mass with non-traditional automakers in North America,'' Miller said. ``The Big Three no longer have the pricing power, and the pricing power is being set by the low-cost producers.

``This is what happened in steel and airlines and what is happening now before your eyes in the automotive industry,'' said Miller, who has helped lead Bethlehem Steel Corp. and United Airlines parent UAL Corp. through Chapter 11 restructurings.

To the Streets

UAW members are ``resigned'' that they are going to have to take some cutbacks, said Al Benchich, president of UAW Local 909 at a GM transmission factory in Warren, Michigan. They won't agree to let the company cut everything.

``People fought and died to win the benefits and wages that we've gotten over the years,'' said Benchich. ``It wasn't just handed to us. So now we'll probably have to take to the streets again to keep what we've won or get it back.''

Miller said if Delphi workers strike, their plants will risk being shut.

Rick Wagoner, GM's chief executive, has been negotiating with the UAW to lower health-care costs and retiree benefits. Those costs, GM says, add more than $1,500 to the cost of every car and truck sold in the U.S.

$14 an Hour

In June, Wagoner announced the company would eliminate 25,000 jobs, or 17 percent of the company's workforce, by 2008 and close an unspecified number of plants. The automaker also plans to buy more parts in lower-wage paying countries to reduce costs.

Negotiations aimed at a reorganization plan filed voluntarily with the bankruptcy judge could include bonuses to encourage long-time Delphi workers to retire, quit or accept lower pay, Miller said. These ``buyouts'' would enable Delphi to hire a new workforce starting at $14 an hour, and in turn, save both Delphi and GM money. GM will have to decide whether the savings would be sufficient for the company to help pay for Delphi's buyouts, Miller said.

Asked to compare his situation to Wagoner's, Miller said: ``My problem is more urgent; Rick's problem is more serious.''



To contact the reporter on this story:
Jeff Bennett in Southfield, Michigan, at jbennett17@bloomberg.net;
John Lippert in Southfield, Michigan, at jlippert@bloomberg.net
L
A humble servant of the Lord Jesus Christ

Don't forget to say your prayers!
The unborn have rights too.
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