Delphi and Chapter 11
I was reading an article on Delphi, here is some excerpt:
“Detroit, the last bastion of blue-collar affluence, is collapsing under the weight of pension and health-care costs. That's what drove Delphi into Chapter 11 this month, the largest industrial bankruptcy ever. Spun off from GM in 1999, America's largest car-parts maker is losing billions because its average of $65 in hourly labor costs is at least three times as high as its domestic rivals'”
“In a global economy, Miller argues, American business can no longer afford labor contracts that require it to "burn the furniture" to feed ever-growing pension and health-care obligations. "What's happening at Delphi is just a small part of a huge national problem," he says. "This is our country's dilemma as we talk about Medicare and Social Security."
“The union accuses Miller of creating a new class of working poor. The $10 an hour wages he's after equal $20,800 a year—less than half the median family income in America. "We helped create the middle class, and that was good for all of America," says former UAW president Doug Fraser. "You hate to see that all unravel."
"I don't want this to completely come out of the hide of our people," he says. Last week he (Miller) spoke to Hillary Clinton and says they agreed to work together to get Washington to reconsider health-care reform. (Clinton declined to comment.).
Here is my take on the article. Steve Miller is the current CEO of Delphi. Started in August. Desperate times make for strange bedfellows. Who would ever think that a fat cat CEO would seek out to nationalize anything? Or a pro-union politician would sit down with a union busting CEO and talk about working together on legislation or reform? For Delphi to exist the union will be busted and the taxpayers will have to get involved or the union will have to agree to a 2/3 pay cut. If Delphi goes under then the union will be out of a job. When Delphi spun off, GM agreed to maintain the retirement package if Delphi was to go under. If the UAW doesn’t work with Delphi then GM will be burdened with Delphi’s obligations and it’s a big burden, it’s so large that it could bring down GM; the taxpayer’s will be stuck with the bill.
I don’t know what’s broken, the healthcare system or the antiquated union-v-corporation relationships. In either case the taxpayers are going to get stuck with the bill. The old way of doing things just isn’t working in today’s global economy.
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Irish Pennant
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