DELPHI GIVES WORKERS CHOICE OF PAY CUTS OR SHUTDOWNS

By Diane M. Grassi


The erosion of the manufacturing sector in the United States started decades ago, however the playbooks used by CEO’s have changed. Instead of renegotiation of labor contracts and requests for concessions, the threat of permanent job loss, steep rollbacks of salaries and the complete elimination of employee benefits has replaced management propositions.

We have heard of offshoring of the apparel and textile industries, the furniture and steel industries and more recently the givebacks by airline employees including pilots. But different from those scenarios is a new variation or precedent being set with the bankruptcy filing October 8, 2005 by the Delphi Corporation, one of the world’s largest auto suppliers, formerly a division of General Motors Corp., prior to 1999.

At stake are thousands of U.S. jobs and more importantly the ultimatum involved of slashing up to two-thirds of workers’ hourly wages. Delphi currently employs 50,600 workers including employees in Canada and 45 manufacturing plants in 16 states. 34,000 are unionized in the U.S., with 24,000 United Auto Workers Union employees and 8,500 from the International Electrical Workers Union, in addition to 12,000 retirees also impacted.

In an original proposal by Delphi’s CEO, Robert S. Miller, who took over the struggling parts-maker in July 2005 following his helm at Bethlehem Steel Corp., he asked for the deflation of wages for production workers at a $10.00 to $12.00 per hour range, where the average wage is presently $26.00 an hour. Now, he has changed those figures to $9.50 or $10.00 an hour. New-hires would see a starting wage of $9.00, down from the present $14.00 wage.

In addition to changes in wages, Delphi has an extensive list of requirements it has pitched to the UAW in a letter sent October 21st. They include: large increases for out-of-pocket healthcare costs presently from $500.00 per family per year increased to $5,000.00 per family per year; elimination of dental and vision insurance; reduction of pension benefits to reflect lower rage rates and no pension plan offered after January 1, 2006 for new-hires; elimination of traditional 8-hour overtime pay, now only after a 40 hour week; cost-of-living adjustments and profit sharing will be eliminated; reduction in vacation and sick days.

Unlike the agreement arrived at recently between the General Motors Corp. and the UAW, Delphi’s figures are far more drastic. For example, the out-of-pocket expense for healthcare per family per year at GM is $752.00 as opposed to the proposed $5,000.00 per year by Delphi. Additionally, Delphi’s proposal would allow it to outsource certain jobs performed by skilled-trades workers in the U.S. and the unrestricted right to close, sell or consolidate most of its U.S. plants over the next three years. The proposal also slipped in a radical cut in union representatives or 1 for every 250 workers. No strikes, work stoppages or slowdowns would be permitted during the term of the proposed contract to run through December 31, 2011.

Should no agreement be reached with the unions and Delphi by December 16, 2005, CEO Miller has asked U.S. Bankruptcy Court Judge Robert Drain to revoke its existing labor proposal on January 17, 2006 in order to freely issue its own contract directly to the unions. Judge Drain complied with the request. With the only option left at that point, the unions have discussed the possibility of striking which evoked a response from Miller stating, “Any plant that wants to be at the top of our plant closures list should engage in [such] industrial action as a way of sending a message.”

Delphi will proceed with cuts to salaried employees simultaneously to negotiating with those unionized.
All told, Delphi employs 1,850 white-collar or non-executive workers and 463 executives with 90 senior executives. They know that their jobs are also at risk. They also face reduced health care and pension benefits in addition to those retired salaried workers who will lose all medical benefits beginning in 2007. The most severely impacted of several states in which Delphi has plants will be Michigan, where Delphi is based. It would amount to losses of $4.8 billion imposed on Michigan taxpayers due to the lost income taxes and tax revenue, 2007 alone would cost Michigan $390 million.

If this were not so serious an issue it would almost be laughable. It suggests that Ebenezer Scrooge has come back from the dead. However, the method of using the bankruptcy process for a national corporation’s leverage over workers’ wages and rights, while used in the past, has been brought to new heights in this scenario. And Robert Miller’s dossier includes the bankruptcy filing of Bethlehem Steel in 2003, when he was CEO, and was on the Board of Directors when United Airlines filed for its bankruptcy. Miller defends his decision to file bankruptcy for Delphi because “we could not extract more money from our customers than what the global market says that the parts are worth. That’s it.”

Jim Clark, President of the International Electrical Workers Union, states that “These are not cushy jobs. These are labor-intensive jobs. In the global economy, workers are gong to be exploited. And just because they’re Americans doesn’t mean a big corporation won’t try to pay the least amount that people are willing to work for.” Clark also realizes that means that Delphi “is playing them off against workers in lower-wage countries such as Mexico and China.”

In a recent development, GM has offered to discuss assisting in the pension plan for Delphi employees by offering buyouts to encourage early retirement of its employees. In 1999 when General Motors created Delphi from its auto parts division, it had guaranteed pensions and benefits to Delphi employees. How this would be structured, in light of Delphi’s demand for givebacks, is still under review by GM. But GM, with its own revenue problems cannot risk a work stoppage by Delphi at this time, as it has lost approximately $3 billion so far in 2005. However, GM’s offer does little to solve the heart of the problem from which no U.S. industry is immune.

Ron Getelfinger, President of the UAW, believes that Delphi’s contract proposal “is designed to hasten the dismantling of America’s middle class by importing Third World wages.” Additionally, “the proposal faithfully reflects a vision of America in which an elite few live in luxury while everyone else struggles to make ends meet.”

While there are no guarantees in business, the lack of a decent wage for American workers will ultimately guarantee less revenue generated for the economy, more individual debt and less discretionary spending. Unfortunately, this logic has eclipsed the thinking of those in charge of U.S. corporate America. The pity is they do not even care.