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The Delphi Dilemma
Miller replaced former Delphi CEO J.T. Battenberg who retired early in the year in the wake of an accounting scandal uncovered in an investigation by the SEC and which could result in possible criminal charges against some former Delphi executives. In the weeks that followed the announcement, Delphi stock value plunged and is currently trading in the range of about 30 cents per share after opening at $18 per share during the initial public offering in 1998. Literally thousands of stockholders have see the savings wiped out in the fallout, while the corporate cronies have lined up millions in bonuses for themselves. Bankruptcy Filing In his petition to the bankruptcy court Miller ask to set aside $87,000,000 to be used to line the pockets of those who managed the company into the shape it is in. So, the current bankruptcy code is set up to reward those at fault and place the burden on the innocent victims of their acts. “Some people insist that fairness requires that we slash wages across the board if we cut wages for anyone,” Miller states. “Well, I am sorry. My job is to preserve the value of this enterprise as we restructure. We have to adjust to market conditions and appropriately pay for our human capital at each level. There are large disparities in this country and around the world in what people can expect for mowing the lawn, versus managing a huge business. It may not be fair, but it is reality.” “The way the code is now structured, the temptation
is to make the workforce pay for management's mistakes, rather than taking
all of the stakeholders into account and re-building the company together,”
says Harley Shaiken, a professor at the University of California at Berkeley
who specializes in labor issues. Chapter 11 calls on management to bargain
with unions in good faith to reduce costs, but also permits management
to petition the court to void labor contracts and substitute whatever
terms it chooses. Miller has asked the court to set a deadline of December
16, 2005 to negotiate a new contract. If a new agreement cannot be reached
by then, a court date will be set in January to terminate the current
contract. Once the judge rules to terminate the existing agreement, then
all strike clauses are terminated as well and the UAW could strike. “The UAW received Delphi's contract proposal today. In light of Delphi CEO Steve Miller's recent public comments, we were not surprised that Delphi's proposal displays a total lack of concern about the impact it would have on Delphi workers, their families, their communities and our nation. Delphi's proposal is designed to hasten the dismantling of America's middle class by importing Third World wages to the United States. In short, the proposal faithfully reflects a vision of an America in which an elite few live in luxury while everyone else struggles to make ends meet. Maybe some believe the American Dream is over; the UAW rejects that dismal idea and will continue the struggle to fulfill that dream.” “The Union is committed to preserving the rights and protections earned through collective bargaining. In anticipation of a court fight over the “necessity” for the concessions sought by the Company, the UAW has begun a thorough analysis and review of the Company's financials, its business plan, restructuring scenarios and alternatives. The UAW will do everything in its power, both in court and at the bargaining table, to protect the interests of its members and retirees. And we will work to assure that all of Delphi's creditors, shareholders and other constituencies make appropriate sacrifices in any restructuring effort - so that Delphi does not single out its active and retired employees as the only groups making sacrifices.” Delphi's Move Overseas Back in the late 1980's and early 1990's, Plant 21 of
Delphi's Alabama Site was building TC Pumps, with 90% of that volume being
shipped to Europe. The product line lost massive money, but we were told
that it was ok because the TC Pump was helping Delphi establish their
name in Europe. Our location paid the price in terms of lost profitability
to allow the corporation to build a name overseas. After years of losing
money on the pump, the product line was moved to Michigan and Europe to
“reduce losses.” You have to wonder how much of the losses
we sustained as a result of that venture went into building plants in
foreign countries to take business away from the unionized U.S. workforce.
The argument could be made that Delphi used their U.S. operations as a
cash cow to finance their expansion into foreign countries and markets.
Now with borrowing money against the U.S. operations and earmarking part
of that for overseas, you have to wonder if the tradition is still continuing.
Delphi calculates profit by subtracting total cost from sales volume, which is standard practice. To measure their total cost a formula is used based on manufacturing expense, direct material and divisional allocations. Direct material is all purchase products that are part of the final assembly. For example, the steel purchased for forming in a Halfshaft is direct material. The wiring assembly for a Magnasteer Rack and Pinion is direct material. Divisional allocations are the cost we pay for having the privilege of being part of them. This includes product design, sales and executives. The final piece is manufacturing expense and that is where we come in. Manufacturing expense is everything it requires to actually build the product. Indirect material - such as tooling, gloves and etc. and people cost. Each plant's budget is based solely on manufacturing expense because we have no control over the other two pieces of the puzzle. That is how we can meet our budget but still lose millions of dollars in profit. Last year alone, the Automotive Holdings Group - those
12 plants that are suppose to be the worse in corporation, averaged an
11% improvement in manufacturing cost. This compares with an employee
compensation increase of about 5% - including wages and benefits. So while
employee cost rose 5%, the effectiveness of those employees improved 11%
at the Automotive Holdings Group alone. In other words, the effectiveness
of employees rose at twice the rate of their compensation. With that being
the case, how can employee compensation be the major reason for the financial
difficulties? There is no denying that our all in compensation rate is
higher than that of our competitors in the United States, but not to the
point that Miller is suggesting. Considering Delphi's formula for calculating
profit, any restructuring plan would involve looking at cost at all levels
as oppose to simply going after people. But then again, that is the easiest
way to address the issues with the least amount of effort from the top
management structure - you know, those people who need that 250% retention
bonus to stay on. Many of our members labor under the misconception that the company has given us all these wages and benefits through the years. This idea even goes back to the GM days when many referred to GM as “Generous Motors.” However, Miller's contract proposal should show each member at a Delphi facility just what the company thinks of you. Everything that is missing in his offer from the current agreement we can thank the UAW for. The wages and benefits we have enjoyed have been the result of years of collective bargaining and the sacrifice and struggles of generations of UAW members. It is now our turn to fight to protect what we can of our agreement. Bankruptcy changes the rules and makes it harder to maintain all of our gains, but that doesn't mean that we give up the ship. Steve Miller has stated that any location that goes on strike will go to the top of the closure list. Striking is the union's most effective bargaining tool and we can't be bullied into giving that up. Besides, if there were a strike more than likely it would be a nation wide walk out. In response to Miller's comments UAW Vice-President Richard Shoemaker told the press “Strikes are part of the collective bargaining process in normal times, and they certainly end up as a part of this process. It would be presumptuous for anyone at this stage to suggest that is, or is not going to happen. But it is certainly one of the options available at this time.” Options for Our Members As part of a deal between the UAW and GM to make adjustments to health care coverage in October 2005, GM acknowledged their liability to those Delphi workers who were one time GM employees. Where Do We Go From Here? All we can do in the short run is continue to focus on doing our job and place our trust in the International Union. Protecting our customers during this period is vitally important to maintain our current business once the details of a new agreement have been worked out. Solidarity in the ranks is more important than ever before. Miller's outlandish comments have infuriated our membership and brought us together. We can never forget that solidarity is the single greatest power we have and that alone can see us through these dark days.
“When you buy a Hyundai you get a satellite radio as your option, but if you buy a Chevrolet you get social welfare as an option. Long term, the customer is going to desert you if you try to price for your social-welfare costs,” “The revamping of Delphi in bankruptcy “will put the unions in the difficult position of perhaps having to make trade-offs between maximizing the pay and benefits of active workers versus maximizing the chances for saving these pension plans,” “Some people insist that fairness requires that we slash wages across the board if we cut wages for anyone. Well, I am sorry. My job is to preserve the value of this enterprise as we restructure. We have to adjust to market conditions and appropriately pay for our human capital at each level. There are large disparities in this country and around the world in what people can expect for mowing the lawn, versus managing a huge business. It may not be fair, but it is reality.” Speaking of UAW President Ron Gettelfinger: “I wouldn't want to be in his shoes for all the tea in China. He's going to have to help half a million of workers get used to the idea that globalization has taken away the ability to have someone who mows the lawn or sweeps the floor get $65 an hour.” “If you work at Delphi you may have to buy a Chevrolet instead of an Escalade. I was talking to some hourly workers at Boeing and they can't buy a Boeing airplane.”
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