Thursday, October 13, 2005


In the wake of the Delphi bankruptcy, the company’s chairman, Robert Miller, is asking unionized employees to do some serious belt-tightening, while management is enjoying a nice perk for a job not so well done.

Miller said Delphi increased severance packages for some top executives just before the bankruptcy filing because he had to act to keep his management team. Miller, whose own pay includes a $3 million signing bonus and a $1.5 million annual salary, said executives had to sign agreements to stay with the company to be eligible for the packages. "They can't quit. We blocked the exit doors," Miller said.

Delphi is demanding wage cuts of 50 percent or more from unionized workers, relief for Delphi's pension and health care bills and more power to close or sell factories.
The disparate fates of the executives and the rank-and-file at Delphi have naturally raised some eyebrows and some voices.

In Michigan, Gov. Jennifer M. Granholm has criticized the severance packages for upper management while Miller is demanding "brutal, draconian pay cuts" for other employees. Ronald A. Gettelfinger, president of United Auto Workers union, called the severance deals a "disgusting spectacle."
No doubt about it, the United Auto Workers union is staring down the barrel of a serious dilemma. Accepting the pay cuts sets a dangerous precedent by letting Delphi use bankruptcy to renege on the terms of a standing contract. Workers will walk away with 50 percent lower wages and the knowledge that during tough economic times, their employer reserves the right to call all bets of. On the other hand, Delphi cannot remain competitive (not that it’s been particularly competitive, having lost $4.75 billion in 2004) without lowering its operating costs. If Delphi continues to pay its workers what it is paying them now, more factories will shut down, leaving more workers jobless.

GM has been behind the times when it comes to automotive innovation. And perhaps if the company was making better cars and selling more of them, Delphi’s economic woes would be ameliorated. But the fact is, in the current era of free trade, American manufacturing simply can’t compete with cheap overseas competition. In his own insensitive way, Miller addressed this dilema.

"I do not blame these people," Miller said. "They are being hurt. Their expectations are being dashed, " Miller said. "Globalization has swept over them and they are extremely angry. They need to lash out at somebody . . . me."
He’s curt, and he’s dismissive about his own role in protecting the livelihood of Delphi’s workers, but there’s a sizable nugget of truth in what he says. Wednesday’s print edition of the Washington Post featured a graphic comparing "Average Manufacturing Wages and Benefits." According to the graphic, the average worker at Delphi earns $65/ hour including wages and benefits. The average car parts manufacturing worker in Mexico earns $3.49/ hour. It doesn’t take an economist to see that in this model of global competition, the American Worker is bound to lose.

There are potential remedies for the plight of American workers, but they’re not going to come from the negotiating table over at Delphi. Some kind of global wage standardization would certainly curb the race to the bottom that we see with outsourcing. But that’s beyond pie in the sky at this point and will remain so until we get around to that whole "workers of the world unite" thing. Until the revolution, the best hope for American workers is the federal government stepping in by creating laws that regulate industry and restrict free trade, making it more difficult for employers to look overseas for cheap labor. Unless there’s some systemic change in the way America does business with the rest of the world, don’t expect to see a reversal of fortune for American workers anytime soon.

--Matthew McCoy