Delphi, a auto parts supplier that has billions and billions in annual sales has declared bankruptcy and I think it is a pivotal time in the history of the auto industry in the United States as well as in the economy of this country as well as the world - THIS IS BIG!
Delphi was spun off from GM in 1999. Visteon is a similar company spun off from Ford Motor.
Delphi employs thousands of workers here in Michigan, the U.S. and around the world. The bankruptcy affects only the U.S. Delphi units.
Newspaper headlines were huge when Delphi asked its American employees to agree to a 63% pay and benefit cut - $27 per hour to $10 per hour and pay 27% of their health premiums from 7%.
Delphi declared bankruptcy before the new, much more stringent bankruptcy rules came into affect in the middle of October.
I say that this move is HISTORIC because it will change the way American Auto Companies function and the way the UAW union functions.
When I was growing up, some of my high school friends did not want to waste their time on college - they could get a job that paid more than college type jobs, had security, paid a pension, paid all healthcare benefits and you could get in without any experience or education AND you could not get fired because the UNION protected you. You could not lose by working for the BIG THREE or four, at that time.
Things were going well in post WWII America. The middle class was growing, people were buying new cars, the auto workers were buying new cars and the auto companies were just trying to out do each other in style and engine muscle. The workers were buying newer homes and later cottages and the president of the U.S. declared that as goes GM, goes the country (or something like that).
GLOBALIZATION started slowly. The Japanese learned our industrial techniques and then refined them and made them better. We were too full of ourselves to notice.
The UAW wanted more and more, every contract period. Why not, the auto companies could afford it and after all the UAW had a powerful weapon - strike or better known as blackmail. They would target one company to strike, allowing the others to continue to do business and maybe actually steal some business from the struck company which could not provide product - they always caved in.
The unions became so powerful that if a company needed to lay off workers, the workers would go into a idle workers pool and were still paid 90% of their regular wages. The companies could not lower their costs even in a downturn - they were stuck.
As globalization made its presence known, U.S. auto companies tried to deal with the challenge. The UAW started seeing the danger too but could not move or were willing to move fast enough.
Delphi, a huge parts manufacturer was spun off from GM but with "legacy" issues, i.e. their workers were still part of the UAW, made the same wages and benefits and that could not be changed- by contract.
Other competing parts makers were not unionized, had lower costs and could compete very well with companies like Delphi in fact they kicked Delphi's ass.
Now Delphi has hired a turn-around expert and he had the balls to make the only call remaining - bankruptcy.
He will sell most of the U.S. factories and the buyers will not accept existing UAW contracts .He will keep the Mexican and other overseas units that make a profit.
Is this fair to the workers and retirees that may lose their pensions and benefits - absolutely not. They trusted in their union bosses to keep doing what they always did - get better and better contracts. The auto companies make their shareholders happy by maintaining labor peace and profits and dividends rolling in. Both entities were short sited and dumb as shit.
Everyone knew this crisis was going to happen. The signs were unmistakable. Analysts predicted it but no one paid attention - now they have to.
An ironic moment happened when the UAW president said that workers would not be able to afford the cars they make with the new, low wages demanded by Delphi. They should remember that it probably was because of their pay and benefits that autos became unaffordable to the rest of the country and foreign autos became more affordable and better built.
The fact that this crisis was not foreseen and adjustments made to meet it head on - all hell will now break loose. Michigan's economy as well as the economy of the whole country will be affected. The cut in wages and the unemployment will be catastrophic to the service industry and to state and local governments. It will take years to get back to economic health in Michigan.
A recent poll among parents showed that very few considered higher education for their kids as a priority, mainly because they could always go work at the auto company. Those days are GONE parents so you might as well tell your kids to stay in school and learn a skill - unskilled labor will no longer pay as much as it used to.
Janusz
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