Posted on 10/13/2005 6:50:57 AM PDT by Dane
By GREG KEENAN
Thursday, October 13, 2005 Page B4
AUTO INDUSTRY REPORTER
Industrial America needs to be restructured because soaring labour and health care costs mean U.S. companies can't compete globally, says the chairman of auto parts giant Delphi Corp., which was granted bankruptcy protection last weekend.
"Paying $65 an hour for somebody mowing the lawn at one of our plants is just not going to survive anywhere in Industrial America for very long," Robert Miller, chairman and chief executive officer of Delphi told reporters yesterday. "That's just a hard fact of life."
The bankruptcy protection of Delphi, the largest U.S. auto parts maker with sales of $28-billion (U.S.) annually, has lessons for the entire country and especially for the auto industry and Delphi's largest customer, General Motors Corp., Mr. Miller told a news conference in Troy, Mich.
"You need to do something or you are at risk of ending up where Bethlehem Steel ended up, where United Airlines ended up, where Delphi has ended up," he said of GM, which faces the same labour expenses and raging health care inflation, plus competition from offshore-based auto makers in its own backyard with much lower costs.
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Mr. Miller speaks from experience as the CEO of Bethlehem Steel Corp. when it was granted protection, a director of United Airlines parent UAL Corp. -- which is thoroughly familiar with Chapter 11 of the U.S. Bankruptcy Code -- and now Delphi.
The Delphi restructuring brings two themes to the forefront, he said.
One is globalization and the other is education.
"If you want to make sure that your kids have a good standard of living, you make sure that they get a good education because the world pays knowledge workers far more than it pays manual industrial workers," he told reporters.
Workers taking advantage of clauses that allow them to retire in their 50s after 30 years' work are living into their 90s, he said.
"You are going to want to be enjoying the fruits of your labour for more years than you were at labour. I don't know how we're going to be able to afford that."
Delphi is the largest auto parts maker to seek Chapter 11 restructuring, as that industry -- and perhaps automotive giants GM and Ford Motor Co. themselves -- follows steel and airlines, which have shed hundreds of thousands of unionized employees and dumped pension obligations onto the U.S. government.
Mr. Miller noted that a GM Chapter 11 filing is not imminent or likely, but pointed out that the world's largest auto maker is at serious risk.
A botched restructuring at Delphi, which is GM's largest parts supplier with $2,400 worth of parts on the average Chevrolet, Pontiac, Saturn or other GM vehicle, "could potentially injure most of the world's auto makers and perhaps fatally wound General Motors," he said.
GM's market share decline means the auto maker has slashed production by one million vehicles a year annually over the past three years, which has cost Delphi several billion dollars in revenue.
The production cuts also mean GM has been unable to hire back excess Delphi workers. About 4,000 workers are receiving full pay and benefits but have no work. That costs Delphi $100-million every quarter, Mr. Miller said.
GM spun off Delphi in 1999, but retained some pension and health care obligations for some of the parts company's employees that it has warned could cost it up to $11-billion.
Mr. Miller's comments underline what is a major crisis for GM and its chief executive officer Rick Wagoner, who is faced with the potential of a court-ordered bailout of Delphi's pension plan. At the same time, GM wants the United Auto Workers union to agree to cuts in health care benefits that amount to about $1-billion annually and would reduce GM's $5.6-billion annual tab.
GM faces potential disruptions in parts supplies if there is labour unrest at Delphi, although Mr. Miller said yesterday he does not expect any trouble.
The chickens come home to roost.
They are the world's largest socialist entity that supports people who do not work.
Look for Delphi to leave the USA and set up shop in China.
"Paying $65 an hour for somebody mowing the lawn at one of our plants is just not going to survive anywhere in Industrial America for very long," Robert Miller, chairman and chief executive officer of Delphi told reporters yesterday. "That's just a hard fact of life."
A company that does that needs to bite the dust.
highly doubtful delphi would be welcomed in china. china is set to export autos to the usa beginning in two years. while china makes garbage mostly, they will be building their own supplier networks for autos. its called industrial policy, a thing which once made america strong, but is now forgotten.
I wonder how many new cars could be designed with that money. Or factories updated/opened. Or hybrids cars researched...
$65 bucks an hour to mow the lawn... I wonder what the executives get?
Miller also lashed out at a wave of criticism -- led by UAW President Ron Gettelfinger and Gov. Jennifer Granholm -- of Delphi's move to sweeten executive severance agreements just before Saturday's bankruptcy filing.
"Some people insist that fairness requires that we slash wages across the board," Miller said. "Well, I'm sorry. ... There are large disparities in this country and around the world in what people can expect for mowing a lawn versus managing a huge business."
Miller said he believed Granholm "did not fully understand" that the severance deals were necessary to prevent executives and top managers from quitting for other jobs.
"We are in a market for human capital," he said. "If you pay too much for a particular class of employee, you go broke. You pay too little, and you won't have anyone left to do the work."
Granholm spokeswoman Liz Boyd said Wednesday that the "governor stands behind her comments. I think the governor was very clear."
Miller also defended his $3 million signing bonus to join Delphi, "to replace all the other stream of income I was asked to give up." He said he expected to take a cut in his $1.5 million annual salary as part of the restructuring.
Miller's previous companies???
Federal Mogal and Bethlehem Steel... what a resume'
I am unsure where the $65 figure comes from. Around these parts 2 Delphi plants face uncertain futures. The average hourly worker faces a cut in pay from $27 per hour to about $12-17 per hour. I doubt the other fugure is correct.
What has always been a problem is the fact that these unskilled workers continue to get far better wages for their jobs than do skilled workers in the same cities. If they work overtime or weekends the amount is incredible. The sad part is that many of these auto workers have spent like drunken sailors always asssuming that big GM would take care of them. How sad, for all of us. The economy in Michigan will suffer greatly because of this Delphi problem.
Executives have to be persuaded to stay with a sinking ship...that costs money. Still, it costs less to persuade them to stay than it costs to lure replacements in -
"Hey! want to give up your job at a successful company and come to work for us while we try to successfully come out of bankruptcy?"
At the same time bonuses for Hourly workers would be foolish - you don't need to retain them as the Hourly workers can be replaced for much less than you're paying now. Having highly paid worker jump ship is a good thing. Unfortunately, none of them are going to leave the sinking ship because nobody else is going to pay them $65 an hour to mow the lawn.
I believe that GM deliberately dumped Delphi some years back to force this situation to occur. The 4000 fully-paid workers in Delphi who are idle would be sucking off GM's teat if the company still belonged to GM.
Since it's separate, the collapse will allow Delphi to escape the impossible burdens it finds itself under.
I recognize that all this sounds harsh, but that's reality, folks....
Wages in the auto industry soared because of WWII. After the war, there was no international competition for Detroit's products. The unions colluded and forced up the price of labor. Management passed the costs on to the consumer, who had no choice but to accept whatever was being sold.
The Japanese (car) invasion changed all that.
Are you including the extensive healthcare benefits and other perks?
Because $27 an hour isnt $27 an hour when you count medical and furture medical and retirement benefits.
>>>I am unsure where the $65 figure comes from.
Robert S. "Steve" Miller was part of the turnaround team in the late 70's/early 80's at Chrysler Corp.
As part of the sale GM is responsible for Delphi employees until 2007. Delphi filed for BK because the BK laws will change soon. This has the effect of helping Delphi at the expense of GM.
Expect GM to file within the year.
We just dropped GM....have been a supplier since 1975, and havent been making any $$$ for the past three years.
This is beyond sad, it's tragic. But inevitable.
Let's see, this is the third firm he has drove into the ground. Yet he keeps getting hired. Can you say "cronyism?", but then again, he may be brought in specifically to be the corporate hatchet man when a company wants to remove union influence by restructuring.
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