Wednesday, October 19, 2005

Delphi deal foretells a very grim future

Time was that when a big company demanded pay cuts of 60 percent from more than 30,000 workers in 13 states, announced countless plant closings and put employees on notice that pensions and health benefits were about to be slashed, some sort of political outcry would erupt.

That time has passed.

If there is official outrage over the bankruptcy strategy of Delphi Corp., the largest American auto-parts manufacturer, it is imperceptible. Yes, Michigan Gov. Jennifer Granholm has said her piece. Yes, the press has reported on the bankruptcy - laying out the usual story of an old-line manufacturer finding it so much cheaper to produce its wares overseas that it now must force down wages here at home.

A few have seen fit to mention the exquisitely embroidered golden parachutes the company seeks to provide for 21 top executives who might, after all, downsize themselves out of their jobs and so deserve a soft landing. Still, the commentary congeals predictably around the idea that this is the fault of the United Auto Workers, a union that's been successful at winning pay packages that allow members to live the middle-class life.

"Unsustainable entitlement," one commentator called the UAW contracts. "Welfare," said another, as if heading for a factory before dawn to strap on safety goggles is the moral equivalent of a day spent dawdling in front of the TV.

For those who missed the brief news flash about this monumental bankruptcy, here's the outline: Delphi, once a subsidiary of General Motors, is losing money. The parts maker complains of U.S. wages that are too high to compete with labor from Mexico, China and its other offshore locales. It is hell-bent on "addressing" its "legacy issues." That's corporate-speak for cutting pensions and health benefits for retirees.

Delphi wants to slash its American production workers' wages from about $27 an hour to $10 or $12, and expects the UAW to go along. Otherwise, the company will throw the workers on the mercy of the bankruptcy court. Delphi may well dump its pension obligations on the government. This could leave retirees with drastically reduced checks and taxpayers holding the bag.
This is really staggering. I did a little thought experiment today wondering about the implications of an abrupt 60% hack in the Bloor household income, and the results were devastating. It will unquestionably be even worse for each and every one of those families, most of whom were probably getting by on $56K without much of a cushion in very modest homes, driving non-luxe cars, sending their kids to public schools and keeping entertainment/vacation expenses pretty low. $20K? Buh-bye, Ownership Society.

There aren't any easy answers to this problem, and no sentient individual can expect any enduring solutions in the short term. But please, can the pundidiots out there who keep insisting that the race to the bottom is a myth just STFU now and deal with reality for a change?


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