GM to use Delphi bankruptcy as bargaining chip against UAW

Business Week ^ | 10/15/05 | Business Week

[Ninian Dryhope]

''a deal-is-a-deal''

A deal is not a deal when it is made under duress, is it? The union extorts their above market rates wages and benefits from companies by using violence and intimidation against both the company and replacement workers. Above market rates wages cannot be sustained over the long term in a market economy. If the average Joe wants to earn good money, he has to get a good education or he has to be able to provide goods and services for which the demand is high enough to pay high prices for. Otherwise the average Joe is going to make the wage available for the average Joe, which is not too much, since he is competing against the average Jose and the average Jong when it comes to selling his labor.

[Ninian Dryhope]

"Now, when it finds that a previous agreement under which it benefited at a time past is not so beneficial any longer, it simply dumps those who accepted the lower wage, stayed on the job and benefited the company."

The options are to either dump the provisions or shut down the company. How would going out of business help the workers?

[Ninian Dryhope]

"Apparently, they didn't take into consideration that the employer would misuse the law; once again confirming the truism that the term '' commercial ethics'' is an oximoron."

No, the union did not take into consideration that their outrageous wages and benefits combined with their featherbedding and non-cooperative work behavior would force the companies to go out of business. Have you ever been to a GM plant? Have you have talked to union members? They are a bunch of losers who refuse to cooperate to get the job at hand done. The amazing thing to me is that it has taken so long for the auto companies to go broke, given the quality and attitude of their workers. I guess the companies are just so big that it took quite a while to finally run them into the ground.

[RoadTest]

"My family has six vehicles. 3 American-made, 2 Japanese and one German. When replacement time rolls around, the American-made ones are going to get retired and replaced with Japanese. This is not disloyalty, just plain & simple economic survival for me."

GM has gotten its quality up there with the Japanese. You must be looking at resale value, based on perceived quality, which lags behind reality.

[RoadTest]

" Have you ever been to a GM plant? Have you have talked to union members? They are a bunch of losers who refuse to cooperate to get the job at hand done. "

I think they (UAW members) have mended their ways to enough of an extent that GM's quality ratings in the J.D.Powers surveys are comparable to Japanese quality. But it appears it's too little, too late.

[laredo44]

Now, when it finds that a previous agreement under which it benefitted at a time past is not so beneficial any longer, it simply dumps those who accepted the lower wage, stayed on the job and benefitted the company.

That is morally dispicable and contrary to every tenet of right and wrong we preach to the electorate. What the hell is wrong with our moral compass?

There is more than one moral compass at work here. What the workers agreed to do was work for the offered wage and a promise. The delivery of the promise, and indeed, the offered wage were both contingent on an ability to do so.

The workers are every bit as responsible for the wage and the promise as the company is. As the wage and the promise became unsustainable, it was the employees' responsibility as well a management's, to make adjustments to the agreement to keep both viable.

By presuming market omniscience on the part of the company, employees attempted to abandon their own responsibilities. Given the current conditions, whether those agreements "benefitted the company" is, to say the least, moot.

[CurlyDave]

GM has gotten its quality up there with the Japanese. You must be looking at resale value, based on perceived quality, which lags behind reality.

No, I am looking at my experience, which I feel is reality.

You can spin this and rationalize it any way you want, but for my money both GM and Ford have screwed up for the last time.

If you want to spend your own money on their products, go ahead. To get me back in their showrooms, I have to start seeing some 15 & 20 year old cars on the roads which still run well. This is no trick at all with the Japanese offerings, but Detroit Iron just does not last.

[bert]

.....Why must a company pay the health insurance of 12,000 people who no longer work for the company?.......

Because it was in the spinoff agreement as a concession to get union approval of the deal...... my guess.

[Hotdog]

Nissan...no union also

[SauronOfMordor]

Now if you asked why management did not look up the actuarial data and the growth in health insurance costs and not agree to these deals, you would have a good question. It is likely that the company figured that health care would be nationalized by now or a new owner would take over and renounce the past deals, all of which can happen.

Much more fundamental than that

The executives who agreed to the contract figured they would be retired, and have all their stock options exercised, before the house of cards collapsed.

Managers have an incentive to keep stock prices high during their tenure, but no incentive to care what happens after they move on

[Last Dakotan]

The inane response that ''the market has changed'' is no answer at all, it merely recognizes that the market has risks as well as rewards and that one engages in business enterprises, including labor contracts, in the risks/rewards environment.

Inane my a**. At least you acknowledge that there are risks in contracting your services at a multiple of the going rate.

[TheFrog]

The average union worker's wage-and-benefit package at Delphi is about $65 an hour, according to Delphi. Last week, just days before Delphi filed, the UAW rejected demands to cut workers' pay package to between $16 and $18 an hour.

Miller said he would take a "significant" cut in his $1.5 million salary ($721/hr base) if necessary, and defended Delphi's decision to increase cash bonuses and extend severance packages to 18 months for top executives.

Delphi's sweetened executive packages included stock for 600 executives around the world.

FYI

In 2004, J T. Battenberg, Miller's predecesor, raked in $6,287,384 ($3022/hr) in total compensation including stock option grants from Delphi Corporation.

[RFEngineer]

"What the hell is wrong with our moral compass?"

People aren't willing to pay for it. When your moral compass doesn't sell cars then ALL your employees are on the street.

Bankruptcy and cancellation of retiree and employee contracts/benefit packages is the MOST moral choice at this point.

[KC_for_Freedom]

You are wrong about no incentives. Most managers have limits placed on when they can exercise stock options, and time periods that must expire. I admit it would be smart on their parts to have everything come due the day they planned to retire, and let all heck break loose in the company they ran for years as soon as they leave. But you forget the lawyers. There are lawyers who think these things through. Some of them report to the board of directors who hire and fire the managers. And bribe them with long term stock arrangements. Check the company you are familiar with and see it the manager can cash out upon leaving? Of course they can and will have generous deals for themselves, but often have incentives to continue things after they go.

One company I am familiar with did indeed devise a way to allow my boss to cash out rich. He arranged to "merge" or "sell" things to a new manager as he retired. In the sale he got lots of goodies. But even here I believe he had some stock holidngs that had to run out their terms before he could have the money. If the firm collapsed in the meantime he would still have been a millioniare, but not as big a one as if the company had done well.

[CHICAGOFARMER]

the unions have been ripping this company off for years.

the worker desired what they get.

[middie]

I mentioned that comparative obligation in my comment.

[middie]

???? not inane, unintelligable.

[laredo44]

I mentioned that comparative obligation in my comment.

True, but you slanted your observations against the company unfairly (IMHO): unethical use of the law; business ethics=oxymoron.

You spent little time on the strike-threatening negotiations practices of the union employees.

Faced with erosion in market share in an oligopolistic industry, company executives settled contracts that were not sustainable. Faced with "pay-me-now or pay-me-later" they chose pay-me-later. In hindsight, contrary to your assertion, even the agreed to wage elements were more than the jobs were worth.

GM overpaid on wages AND over promised on benefits.

[laredo44]

Miller said he would take a "significant" cut in his $1.5 million salary ($721/hr base)

It is interesting to note that you used a denominator of 2080 (40 hrs/wk X 52 weeks) to calculate an hourly rate for the CEO like the guy is a clock puncher. Did you deliberately set out to distort?

Looking at it from the other end of the spectrum, using a denominator of 24x7x52, the real time an executive of his stature is on-call for his company, yields about $170/hr or just about double a line worker.

Also interesting is the fact that you didn't show the hourly rate paid by the top guy at the UAW. How much is he compensated compared to the hourly worker? And why did you ignore that comparison? Afraid it would make the company guy look less greedy? Afraid it would damage the propaganda web you are spinning?

[laredo44]

???? not inane, unintelligable.

Not sure how you miss the intelligibility of LD's response. LD is agreeing with you. LD is acknowledging your acknowledgment that risk accompanies promises and the more outlandish the promise the greater the risk.

If I contract with you to wash my car for $1,000,000, there is a pretty high risk that you will not get that payment. I would imagine that you'd do some checking before doing the work. That's what LD was saying. The labor contracts provided wage elements that were higher than the market could sustain, and risk did inhere to those overpayments.