Is this the only way US companies can compete against global competitions? What if GM folds? Will people support a national health care system then? link Delphi Move Could Force Industry Changes By DEE-ANN DURBIN The Associated Press Monday, October 10, 2005; 7:20 AM ANN ARBOR, Mich. -- Delphi Corp.'s bankruptcy could change the face of the U.S. auto industry, ratcheting up the pressure to produce cheaper auto parts overseas and forcing unprecedented cuts in union wages and benefits, industry analysts and autoworkers said Sunday. Delphi, the largest U.S. auto supplier, filed for bankruptcy Saturday and is expected to slash jobs and wages and close many of its 31 U.S. plants as part of its reorganization. General Motors Corp., Delphi's largest customer and former parent, said it might have to assume up to $11 billion in retirement benefits for Delphi's union-represented employees. The Delphi Corp. in Troy, Mich., is shown Sept. 23, 2005. Delphi is asking the United Auto Workers union to accept wage cuts of more than 50 percent and the elimination of pay for laid-off workers as part of the auto supplier's effort to stave off bankruptcy, according to a letter from UAW leaders in Kokomo, Ind., posted Thursday, Oct. 6, 2005, on a union Web site. (AP Photo/Carlos Osorio, File) (Carlos Osorio - AP) But the ripple effects won't end there. Delphi has 500 suppliers of its own who are waiting to see what kind of labor agreement Delphi negotiates with the United Auto Workers. Once a leaner Delphi emerges from bankruptcy, expected in 2007, its suppliers could face added pressure to lower their own costs through wage cuts or increased use of overseas labor. "There's a great deal of concern among auto suppliers about whether they can remain profitable or survive with union contracts," said Jim Gillette, a supplier analyst with CSM Worldwide. "If Delphi's willing to force renegotiation through a bankruptcy filing, I suspect other suppliers would do the same." Delphi's bankruptcy, which is expected to result in plant closures and layoffs, is one of the largest in U.S. history. The Troy-based company has 50,000 U.S. employees. Union members also are watching closely. Tonyia Young, a UAW member from Anderson, Ind., has worked for auto supplier Guide Corp. since 2002 and worries that Guide will match changes in Delphi's contracts because Delphi has a plant nearby. Guide, like Delphi, already has a two-tier wage agreement that allows it to pay newer hires like Young around $15 per hour, $8 less than its older hires. In a letter sent to UAW members last week, local union leaders in Indiana said Delphi wants to cut hourly wages from $27 to $10-$12, slash vacation time and make workers contribute more for their own health care. The letter warned that cuts under a bankruptcy judge could be even worse. Young said concessions at supplier plants are part of a growing pattern that UAW members need to confront during Delphi's restructuring. "I think Delphi workers probably have no choice but to strike," she said. "The corporation has filed bankruptcy and they've kind of drawn the line in the sand about what they're willing to do. It seems to me that any negotiation between our leadership and Delphi will not be very productive." But David Cole, chairman of the Center for Automotive Research, said the UAW will have to move from a confrontational mode to one of collaboration if it's going to survive. With Delphi's bankruptcy, wages will be set by the market, not by bargaining. "The Delphi bankruptcy is a real watershed point for the UAW," Cole said. "The UAW is virtually powerless now." James McTevia, a restructuring expert who is representing Delphi suppliers in the bankruptcy proceedings, said Delphi could set a new model for the entire industry by scaling back its hourly work force and its U.S. manufacturing capacity and giving lower wages and benefits to the workers that remain. Such a change is sorely needed, McTevia said. Autos and auto parts will always be made in the United States for U.S. customers, he said, but the country needs less capacity than it currently has, and companies need to increase their presence in emerging markets such as Asia. "North America, Michigan and Detroit are no longer going to be the auto capitals of the world. The auto capital of the world is going global," McTevia said. The Delphi Corp. in Troy, Mich., is shown Sept. 23, 2005. Delphi is asking the United Auto Workers union to accept wage cuts of more than 50 percent and the elimination of pay for laid-off workers as part of the auto supplier's effort to stave off bankruptcy, according to a letter from UAW leaders in Kokomo, Ind., posted Thursday, Oct. 6, 2005, on a union Web site. (AP Photo/Carlos Osorio, File) (Carlos Osorio - AP) Despite Delphi's troubles, Gillette said there's still a future for auto suppliers in the U.S. market. Japanese, German and Korean automakers are moving parts operations here so they can supply their U.S. plants, he said, and while they may not be unionized they often match union wages. Suppliers who produce parts that require a high level of skill and training, such as precision pieces for fuel injectors, also face less competitive pressure from overseas, he said. "We do have a competitive advantage in very complex, precision components for the automobile," he said.
I'd definitely have more sympathy for UAW if cars/trucks of higher reliability were produced from Detroit that rival Japanese automobiles. While I certainly understand their situation and greatly appreciate the contributions the unions have historically made to the wage-laborers, I think UAW, as it stands, has lived its usefulness and is now more detrimental not only to the U.S. auto industry, the morale of U.S. manufacturing in general, but also the welfare of the workers themselves.
This reminds me of a scene from "Roger and Me" where someone has spray painted "Assholes Drive Imports" on an overpass in Flint, Michigan. If anyone hasn't seen "Roger and Me," you really should. Regardless of what you think about Michael Moore now, his first film is one of the most graphic depictiosn I've seen of the effects of globaliazation in America. The rabbit-skinning scene is definitely one of the most disturbing things I've ever seen.
wnes, have you foresaken your liberal roots????? We agree on something!!! Unions are extremely detrimental to competitive businesses. US automakers have a number of problems, many of which are union related. What's interesting is that foreign automakers are now building reliable cars and trucks in the US with US employees. They're smart to locate them in non union states.... Ford and GM don't have that luxury.
japanese cars are better because of the manufacturing methods involved in making them. lean production was a huge development that was made by the japanese and shouldn't be ignored. but your point is true....if these unions don't make major concessions then they will drive their companies into bankruptcy.
It is not the UAW that keeps GM from producing fuel efficient vehicles and that made them produce the Hummer and other gashogs whose sales are collapsing. As far as quality, I believe that Consumer Reports says that their quality has gotten much better in recent years. The auto industry is a fairly high tech industry. If we let it all go overseas it is hard to figure out how we will keep any sort of manufacturing bases. Perhaps even the faithful believers in econ 101 can see that if we make no trucks in the US it could impact on national defense.
If we get rid of unions. . . . we will return to Quasi-Sweat shops Hell . . they are already weakened severely The Over Time law a few years back is an example of that Rocket River
US employees are overpaid from the top. Those managers and directors who spend all their time on useless meetings get paid many times more than bluecolars who actually do some work.
Too much outsourcing helps the company but not the country. Imagine all of the US or Europe manufacturing are outsourced to China and India. The US would be so brittle then. What if a war happens to these states (may or may not involve US)? All the policiticians/army officers/lawyers/doctors/managers/professionals here will be starved to death.
Seems like the best way to make US companies more competitive is to lower the salary of everyone from CEO to the peons. When everone is making as much as their counter parts in China and India, no more worries about cheap labor and outsourcing!
I disagree. I don't have a lot of time to write right now, but I believe outsourcing manufacturing to China and India helps both the company and the country. It helps the country in the form of lower prices for goods. If the US is going to lose manufacturing jobs, it will have to continue to innovate in other areas, which it has proven time and time again that it is able to do. All this crying about outsourcing is a bunch of political pandering to scare people into voting for their protectionist candidate. It cuts across party lines, also. Usually when you think of protectionists you think of liberals screaming to protect union jobs in the rust belt and other non-attractive places to manufacture. The Republicans in the South (Helms, Thurmond, et al) are largely to blame for textile tariffs to protect jobs in places like the Carolinas.
What percentage of people do you expect to be employeed by the fields created by new innovations? The american middle class was build on the foundation of high paying manufacturing jobs. If most of the people are living on walmart wages with no insurance do you believe the professionals would still be able to charge as much as they do today for their services?
I hope all you people who constantly bash unions on this site are willingly to give up your five day work weeks, holidays, and normal business hours. Unions aren't the problem with the auto industry. If there were no unions do you really think jobs would stay here?
Why are foreign automakers building so many plants in the American South? Why would they decide to create jobs here instead of their home countries? Why on Earth would they choose to locate in the American South, of all places? Hmm, maybe because there are no unions there...
And I could flip that around and ask why didn't GM build in the South? Maybe the Japanese sell so many cars here that it has now become cost effective to build here. I guarantee if they weren't selling cars in the US they sure as hell wouldn't be building here. Maybe their entire process is much more efficient than American Automakers' that they can absorb the increased manufacturing cost here for the goodwill of building plants here. The problem with American cars isn't the cost anyway, its the product. And the fact that Toyota can still build a quality car here with American workers proves that the problem lies in design more than manufacturing. Edit: GM has already left Flint high and dry for foreign plants and they still are having their bonds reduced to junk status. but that's the unions' fault?
Manufacturing makes up about a quarter of all US business revenues. Please revisit your assumptions. Thanks in advance. This whole scenario is a rehash of what happened in the 1980s. Your side said the US would crumble at the hands of the Japanese economic machine. Fast forward 20 years later, and Japan's economy has been in the absolute toilet for the past 7-8 years. Much ado about nothing.
There's a difference between acknowledging the contributions unions made in the past and criticizing the stupidity of many union leaders currently. I've worked with enough unions to see their short-sighted nature. Everything in America works on a pendelum. In the past, the pendelum had swung too far towards the owners of the business. Currently the power pendelum is too far in the corner of the unions. It'll fix itself, primarily because it has to, but it's out of balance right now. The US auto industry has mfg techniques that are very similar to the Japanese - primarily due to the GM-Toyota JV. The quality is supposedly better, but it'll take time for the reputation to catch up to the reality (if it truly is a reality). Blame goes on both sides. 1) with the companies for putting out cars that consumers don't like and 2.) with the unions for effectively creating a fixed cos structure that prevents companies from properly reacting to changes in sales.
