Just in-
Auto Supplier Delphi Files for Bankruptcy
By DEE-ANN DURBIN, AP Auto Writer
DETROIT - Delphi Corp., the largest U.S. auto supplier, filed for bankruptcy Saturday, sending shock waves through the nation's auto industry, which already is weakened by high labor costs and falling market share.

The company's bankruptcy is one of the largest in the country's history.
Delphi filed to reorganize its U.S. operations in federal bankruptcy court in New York, where hearings are scheduled to begin next week. Delphi's non-U.S. operations were not included in the filing.

Delphi Chairman and CEO Robert S. Miller said the company hopes to emerge from Chapter 11 in early to mid-2007.

"We will make every effort to make this as quick as possible," Miller told The Associated Press on Saturday.

Miller, a restructuring expert who was hired in July, had threatened to take the company into bankruptcy if he failed to reach a restructuring agreement with Delphi's former parent, General Motors Corp., and its largest union, the United Auto Workers. Miller set a deadline of Oct. 17, when U.S. bankruptcy laws are scheduled to change.

Miller said Delphi will continue negotiating with GM and the UAW to lower its labor costs. Miller said the three parties agreed to continue their discussions after a bankruptcy filing.

"We mutually concluded there was still too much of the complex work yet to be done," Miller said. "It was not going to be efficient to work right up to the midnight deadline to the change in the law."

Miller said nothing will change immediately. Delphi will continue to pay its 50,000 U.S. employees and suppliers and will ship its products on schedule. Delphi has 31 plants in 13 states, including Michigan, Ohio, Alabama and California. The company has 185,000 employees worldwide.

"We are not going to adversely affect our customers," he said. "Our people will get their pay checks and will still have their health benefits. Retirees will continue to get their checks. Any changes to that will be dealt with in an orderly way."

Delphi will finance its operations with $4.5 billion in loans, including up to $2 billion in debtor-in-possession financing from a group of lenders led by JPMorgan Chase Bank and Citigroup Global Markets Inc.

Delphi, based in the Detroit suburb of Troy, has struggled to make a profit since GM spun it off in 1999. It lost $4.8 billion in 2004 and nearly $750 million in the first half of this year.

Delphi had $16.5 billion in total assets as of June 30, the most recent figure available, and has total debt of $6 billion, Standard & Poor's said Thursday. The company had $4.3 billion in unfunded pension liabilities at the end of 2004, according to a company filing with the U.S. Securities and Exchange Commission.

The largest corporate bankruptcy in the U.S. was WorldCom Inc., which had $103.9 billion in pre-bankruptcy assets.

Like Tower Automotive Inc. and other auto suppliers who have recently declared bankruptcy, Delphi has struggled with the high cost of steel and other raw materials as well as U.S. production cuts.

But Delphi also blamed its spinoff agreement with GM for saddling it with high labor costs. Under the agreement, Delphi is required to pay GM wages of $27 an hour to most of its 24,000 UAW-represented workers. That's double the level of competing suppliers, according to Standard & Poor's Ratings Services. Delphi also had to pay full wages and benefits to 4,000 laid-off workers in jobs banks, which cost it $400 million each year.
Delphi has a total of 30,000 U.S. hourly employees and 12,000 hourly retirees. About 6,000 hourly employees are represented by other unions, including the International Union of Electronic Workers/Communications Workers of America.

Under a bankruptcy filing, Delphi could shift at least some of its pension liabilities to the federal government's Pension Benefit Guaranty Corp. and could get the court to order lower wages and benefits for the UAW and higher costs for its parts.

Under the spinoff agreement, GM also is liable for some of Delphi's pension obligations if Delphi is in bankruptcy. In a note to investors, Merrill Lynch analyst John Casesa said GM could be liable for $4.4 billion to $6.7 billion worth of pension and health care benefits.

Delphi and GM have been tightlipped about the negotiations. But a letter sent from UAW leaders to union members in Kokomo, Ind., earlier this week said Delphi asked the UAW to accept wage cuts of more than 50 percent, to $10-$12 an hour, and eliminate the jobs bank. Delphi also called for a reduction in health care benefits and vacation time.

Delphi also has been plagued by an accounting scandal that the FBI and the SEC are now investigating. Six people have resigned because of the investigation, including Delphi's former Chief Financial Officer Alan Dawes.
___
On the Net:
Delphi Corp.: http://www.delphi.com
General Motors Corp.: http://www.gm.com
United Auto Workers: http://www.uaw.org

Looks like primary target for this are employees! Pretty much what most observers have been saying all along.

Looks like primary target for this are employees! Pretty much what most observers have been saying all along.I'm afraid so. And it's so typical too.

It would be nice if regulators would insist a bankrupting company's executives receive compensation cuts of similar proportions to those of employees. I know, I am dreaming.

Unfunded pension obligations since 2004...this is the consequence of relying on the stock market to fund pension plans. The market isn't designed to maintain the rate of returns necessary to ensure such schemes work. But the top management blames this problem on employees and their so-called entitlement mentality, without acknowledging that top management's compensation inflation is based on its own entitlement mentality. :mad:

Look at the unfunded pension liability!!!! I was told by a good source that with the rising interest rates (Mr. Greenspan) that we will see a lot of auto related business go belly up as well as the possibility of some of the top three. Now coupled with rising gas prices makes it worse on profits with many investing heavy in the SUV market, go by the lots and see what is there and then see what they will give you if you have an SUV!?><<:. Although by March of next year gas should be below $2.00 a gallon for most of us.

FWIW - News on October 10.
Worries about GM rise after Delphi bankruptcy
One brokerage says risk of automaker filing for bankruptcy now heightened

• The Delphi effect
Oct. 10: The Wall Street Journal’s Detroit Bureau Chief Joe White discusses the implications of Delphi’s bankruptcy.
CNBC

LIVE QUOTE
SYMBOL LAST CHANGE % CHANGE
• DPH 0.33 -0.79 -70.54%
• GM 25.48 -2.81 -9.93%

Updated: 4:01 p.m. ET Oct. 10, 2005
DETROIT - General Motors Corp. shares fell sharply early on Monday on worries about heightened risks for the world’s largest automaker after auto parts maker Delphi Corp. filed for bankruptcy over the weekend.

Delphi is GM’s largest supplier, and the automaker warned that it faced an increased risk of costly supply disruptions after Delphi filed for Chapter 11 protection in U.S. Bankruptcy Court in New York on Saturday.

One brokerage said the Delphi bankruptcy increased the chances that GM might take the same step, dealers said.

Delphi bonds were quoted 6 percentage points lower in over-the-counter dealings, a trader said, sending ripples through the debt markets . GM shares fell 4 percent.

GM said a Delphi restructuring could “create operating and financial risks for GM,” but added that the bankruptcy filing did not necessarily make it liable for post-retirement health-care and pension benefits for employees at Delphi, which it spun off in 1999.

The range of exposure extends from potentially no material impact to up to $11 billion at the high end, with amounts closer to the midpoint more possible than either end, GM said.

Citing fallout from the bankruptcy, dealers said on Monday that Bank of America had downgraded its rating on GM to “sell” from “neutral” and cut its price target on GM shares to $18 from $32.
Bank of America also increased its estimate of the likelihood that GM itself would file for bankruptcy to 30 percent, the dealers said.
A spokesman for GM, which posted a loss of $2.5 billion in its North American operations in the first half of 2005, was not immediately available for comment.

GM faces many of the same problems, centering on high wage and benefit costs, that drove Delphi into bankruptcy.

Troy, Michigan-based Delphi has struggled since its spinoff, posting net losses of $741 million in the first half of 2005 alone. It had sought financing from GM and sharp cuts in wages and benefits from the United Auto Workers union to restructure unprofitable U.S. operations.

The Chapter 11 filing for reorganization potentially allows steep cuts in wages, benefits and jobs to go forward without the UAW’s approval, marking a big setback for the traditionally militant trade union.

In court papers filed over the weekend, Delphi said it would ask a judge to void its labor contracts if it cannot reach a restructuring agreement with its unions by mid-December.

Delphi, the largest U.S. auto parts supplier, said it would file motions on Dec. 16 to avoid the contracts and eliminate retiree health and life insurance benefits. It proposed starting a court hearing on these matters on Jan. 17.

The company said it plans to submit written proposed contract changes to the unions on or before Oct. 21.

Delphi Chief Executive Steve Miller told Reuters on Saturday to expect a significant reduction in U.S. employment and manufacturing operations, including dropping 4,000 idle UAW workers the company pays under its contract, and others as a reduction in operations makes them unnecessary.

The company aims to eliminate underperforming U.S. plants, which potentially includes about a dozen previously identified as unprofitable.
The start of trading in Delphi shares was delayed on the New York Stock Exchange pending news. The shares fell by nearly half in pre-market trading on the Inet electronic brokerage system, to 60 cents from a Friday NYSE close at $1.12.

Copyright 2005 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content is expressly prohibited without the prior written consent of Reuters.

(copied under "fair use" to illustrate an education point: "Now that Delphi has filed for bankruptcy, GM feels free to disclose it had escape clauses to allow it to avoid picking up the obligation when Delphi uses the bankruptcy court to void employment contracts and pension obligations. This also shows the variance in the story told by GM and Delphi as the bankruptcy progresses - here was Saturday's story [the day of the bankruptcy filing.])Under a bankruptcy filing, Delphi could shift at least some of its pension liabilities to the federal government's Pension Benefit Guaranty Corp. and could get the court to order lower wages and benefits for the UAW and higher costs for its parts.

Under the spinoff agreement, GM also is liable for some of Delphi's pension obligations if Delphi is in bankruptcy. In a note to investors, Merrill Lynch analyst John Casesa said GM could be liable for $4.4 billion to $6.7 billion worth of pension and health care benefits.
Could it be Merrill Lynch was trying to push the GM stock lower to take advantage of short positions? or to drive it lower to pick up some stock cheap?

Latest news - some GM top brass are losing confidence from press, in-house employees, outside vendors and cutsomers.GM's CEO feels the heat as troubles mount By Tom Brown
DETROIT (Reuters) - It's autumn in Detroit but General Motors Corp. Chairman and Chief Executive Rick Wagoner is feeling searing summer heat.

The pressure is mounting on Wagoner with its main auto parts supplier in bankruptcy, GM's share price near multiyear lows and its once-robust sales of gas-guzzling SUVs stalled.

And now he has legendary corporate financier Kirk Kerkorian breathing down his neck and demanding a seat on the GM board. Kerkorian got some help from the U.S. government on Tuesday, when it said he could increase his ownership stake in GM from the 9.5 percent he now holds.

"The heat is excruciatingly high," said Gerald Meyers, a former Detroit auto executive who now teaches business at the University of Michigan.
While GM remains the world's largest automaker -- though, it seems likely to slip behind Toyota Motor Corp. (7203.T) within the next few years -- it remains mired in red ink and rating agencies are taking an increasingly dim view of its prospects, with Standard & Poor's cutting its debt further into high-yield or "junk" status on Monday.

Lately, there seems to be no end to the obstacles blocking its return to profitability.

Among other problems, GM's September U.S. vehicle sales fell 24 percent, as high gasoline prices slammed the sales of giant sport utility vehicles. And months of talks with the United Auto Workers over GM's demand for cuts in union health care and other benefits -- costs identified by Wagoner as the company's biggest single challenge -- appear to have led nowhere.

In more bad news, it said a bankruptcy filing by auto parts supplier Delphi Corp. (Other OTC:DPHIQ - news) could put it on the hook for as much as $11 billion in additional health-care, pension and life-insurance liabilities.
Delphi's Chief Executive Steve Miller warned in an interview published in the Financial Times on Tuesday that a collapse of Delphi could "fatally wound" its former parent.

GM, which spun Delphi off in 1999, remains its biggest customer. S&P cited that as a reason for its latest downgrade of GM, saying it would likely confront the automaker with demands from Delphi for price relief and possible supply disruptions.

KIRK JOINS THE FRAY
Despite the steady stream of grim tidings, GM shares rebounded on Tuesday, after this weekend's Delphi bankruptcy filing slapped them down by 10 percent on Monday.

On Tuesday, the shares ended up 3.7 percent, to $26.42, following the news that Kerkorian was looking to play a larger role at GM.
In remarks last month, GM Vice Chairman Bob Lutz said Kerkorian "smells turnarounds" and that may be why he has built his stake in GM, becoming its biggest individual investor.

But analysts have said Kerkorian may seek to capitalize on his investment in GM, which is currently under water, by pushing for something like a spinoff of core parts of its profitable finance arm, General Motors Acceptance Corp.

At the very least, Kerkorian, whose interest in GM has been described by his spokesman as a "passive investment," could put pressure on GM to ratchet up its stock price.

As someone who has made a long career of maximizing shareholder value, Kerkorian might also demand that GM stop paying a $2.00 dividend that costs it about $1 billion per year in cash flow.
Some analysts see the dividend as totally out of line with a company facing its worst crisis since it nearly went bankrupt in 1992.
HOT SPOT

GM, which lost $1.4 billion in the first half of the year, including $2.5 billion in North America alone, is expected to post another dismal quarter when it reports its third-quarter results next week.
Analysts on average are expecting a third-quarter loss of 68 cents per share, according to Reuters Estimates. But Burnham Securities analyst David Healy said on Tuesday he sees GM posting a much larger loss, between $1.50 and $1.75 per share.

"I would be surprised if they show a third quarter that's better than my numbers, and I'd be interested in finding out why," Healy said.
So far, investors and GM's board have shown little or no sign of exasperation with the slow pace of GM's turnaround, or with Wagoner, who has headed the automaker since 2000. But that could soon change.
"The pressure on GM management is greater than ever ... to adopt a more aggressive turnaround strategy," said Merrill Lynch analyst John Casesa.
GM's chief spokesman Tom Kowaleski declined to comment on Kerkorian's interest in GM or on "speculation" about investor confidence in Wagoner's leadership.

"There's nothing really for us to say ... We know what the issues are. We know what the challenges are. Rick and the entire senior management team is hard at work on every single one of them," Kowaleski said.
Bottom line:
How will this affect OUR guys [quality practitioners] working in the trenches in the automotive supply chain?

Wes,

Delphi has already hit us hard and we're still watching the Ford/Visteon separation of business very carefully - particularly the "holding" company. Thankfully, we don't supply directly to GM.

Delphi has already hit us hard

How so?
(This parenthetical statement added to satisfy the software's refusal to accept a post of < 8 characters)

I really can't get into the financials or contracts/agreements, just suffice it to say it's big bucks.

I really can't get into the financials or contracts/agreements, just suffice it to say it's big bucks.
I wasn't asking how much. I just didn't understand what they hit you with. Were you referring to loss of business, or loss of accounts receivable? Both?

Wasn't sure just what you were asking :confused: Not a loss of business, we just PPAPd with them last week at one of our plants. It's AR.

:topic: FWIW. I had a customer (not publicly in financial trouble as GM is) which unilaterally delayed payment from agreed 30 days to 45 days, then in two payment cycles fell to 60 days. Worse, they tried to claim discount as if they had paid in 10 days. I caught the situation during a routine "walkabout" through the payment clerk's office on the same day we had a truckload of product for that customer being loaded. We finished loading the truck and locked it up in our parking lot. I called the customer contact and said,
"We have your product ready to deliver, but I have put you on credit and delivery hold until you pay all past due debts."

"You can't do that. We're [so and so] and nobody questions our credit."

"I'm not questioning it. I'm looking at facts. You haven't paid."

"All our suppliers are on 60 day payment."

"That's not how our contract reads. This was a courtesy call. I am faxing formal notice, followed by a certified letter."

"You can't do that!"

"I already have. This is just notice. Goodby."
Then I hung up. He called me back twice.

First time: "Who do you think you are? You can't hang up on me!"

"I'm Wes Bucey. I thought I identified myself in our last conversation. I'm hanging up now. Goodby."

Second time: "We need that shipment. You'll shut down our production line."

"I'm not shutting down your production line; you are. I told you the product is ready for delivery as soon as you pay us. Goodby."

The third time, the president of the customer called. "What's this I hear about you shutting down our production line? We need that shipment now."

"I haven't denied you product. Your purchasing agent has denied you product by unilaterally breaking the terms of our contract and not making payment per the contract. You should note the contract specifically calls for conversion to cash in advance if the customer is more than 60 days in arrears."

"What? Do you think we can't pay?"

"I have no idea of your ability to pay. It is your willingness to pay that is the issue."

"We can always buy from someone else."

"That's true. You should know it took us 90 days to tool up to make this product. We own all the tooling and the designs for that tooling. I doubt many of my competitors could tool up in less time. Then, of course, there's all the First Article folderol. I doubt you could get a first production piece from someplace else in less than 120 days. That would be complicated by the fact that I would be on the phone to all my competitors I know to be capable, telling them about the reason you are seeking a new supplier. Simultaneously, of course, our attorneys would be filing suit for accounts receivable and leaking the suit to the business press. Mr. President, I don't bluff. I don't have to. If you have the funds, you should honor the contract. If you don't have the funds, you should tell me and perhaps we can negotiate a resolution to your problem. What's it going to be?"

There was a long, long pause. I waited.

Finally, he said, "I apologize. I'll have a messenger there with a cashier's check within an hour. I'd appreciate it if you could have the goods on our dock by 10:00 am tomorrow."

"Terrific." I said. "As a sign of good faith, I'll send my driver with the shipment and he should be there by the close of business today."

I got the check. We kept the contract for three more years until the customer got bought by a conglomerate and closed up shop in our area, dropping the product line we made parts for.

I am sure that situations like Wes has described are becoming much more
common in automotive. I've seen them in some clients in the past year or two,
as steel price increases and other problems have pushed many toward the edge.

Wes, your handling of the situation was straightforward and professional.

What really ices me (not to mention my clients!) are the customers who manage to nitpick and delay on payments, or suppliers who stall for time, instead of being straight and communicating these issues. Two months ago, we discovered that a supplier who'd been reporting delays in shipping because they "couldn't get steel" ... couldn't get the steel because they weren't paying their bills! In order to keep our production going, I bought a coil of steel (at a premium, rush price) and consigned it to them. We had an exciting 4 or 5 days working thru this process; eventually having to ship to our assembly plant customer premium freight. We were 1 day from stopping
the line... fortunately dodged that bullet!!!

Supply lines are brittle in automotive today!

Regards,
Brad

Although I don't have a significant stake in the Delphi situation, I do have several years of pension benefits, including my contributory percentage, in Visteon's retirement plan. This is company retirement, not stock or investment savings so I can't move it into something a little less risky. It is not a huge benefit, but at the current estimated monthly payout, it would be nice to have at retirement. I have made some adjustments to my personal portfolio to compensate for the likelihood that their fund will default before I get to retirement age. If I am wrong about Visteon and my investments don't belly up, then good for me.
I don't believe that Delphi or Visteon were structured for success in the global market. They grew fat and lazy from too many years of no competition for their products. They are kind of like the spoiled kid who never wanted for anything his whole life. Then at 35 years old, his parents have a calamity befall them that takes their money away and he can't cope with the real world.
I do not blame the union. They are akin to the major league sports world. There was a lot of money for the taking. They felt (rightly so) that the workers should reap some benefits of the "spoils of business". Both the union and management were short sighted and should have structured their pensions to be robust enough to be solvent upon demand for payout. Also, why are there no repercussions to these corporations who don't fund their pension obligations? I say that all office-holders and upper management who receive the multi-million dollar bonuses year in and year out, should have thier funds frozen until the promises they make are kept! Hey, it's my fanatsy and I get to set the requirements.
I have not been one to rely solely on pension. Like all others I hoped my years of hard work and long hours would bring me some return in my old age. You might say that I am a pessimist who is "breaking my eggs before they hatch". No, I am a just realist who can see the writing on the wall.

I will not drink cheap liquor in my "golden years". Life is too short. But if you are around Southern Indiana about 2025 or so, and stop in a Wal-Mart, I will be the guy giving you a cart with the good bourbon on his breath!

Sorry for the long diatribe. It did feel good to vent.

Hey, It's your birthday, you have a right

HAPPY BIRTHDAY:magic:
Hope you enjoy some of that good stuff tonight:bigwave:

And now he has legendary corporate financier Kirk Kerkorian breathing down his neck and demanding a seat on the GM board. Kerkorian got some help from the U.S. government on Tuesday, when it said he could increase his ownership stake in GM from the 9.5 percent he now holds.I got me some help frum the gov'mint.

KIRK JOINS THE FRAY
Despite the steady stream of grim tidings, GM shares rebounded on Tuesday, after this weekend's Delphi bankruptcy filing slapped them down by 10 percent on Monday.

On Tuesday, the shares ended up 3.7 percent, to $26.42, following the news that Kerkorian was looking to play a larger role at GM.
In remarks last month, GM Vice Chairman Bob Lutz said Kerkorian "smells turnarounds" and that may be why he has built his stake in GM, becoming its biggest individual investor. NAW! I just got me some help frum Murel Linch to monkey the price around, so's I could buy me a votin share on the cheap!

But analysts have said Kerkorian may seek to capitalize on his investment in GM, which is currently under water, by pushing for something like a spinoff of core parts of its profitable finance arm, General Motors Acceptance Corp.I always wanted money fer nothin'; and when I'm runnin GMAC I'll git it!

At the very least, Kerkorian, whose interest in GM has been described by his spokesman as a "passive investment," could put pressure on GM to ratchet up its stock price.I'm a gonna make some big money buyin low n sellin high, either way!

GM knew this was coming when they spun Delphi off. Now the rest of us will pay for their unfunded liabilities. Ford and Chrysler will go the same way as well if they do not get rid of their bloated, negotiated, non-competitive payrolls AND quit pushing all of their "requirements" onto their suppliers via bloated, standardized, non-competitive quality systems. Check out the new big three (Toyota, Nissan, Honda) for how to avoid non-competitive labor and how to assure quality by being a PARTNER with your suppliers. If companies are not free to internally compensate for external market pressures, they fail. Required reading: Atlas Shrugged, by Ayn Rand

Having said that, I do feel sorry for the line workers at Delphi. They're going to take a royal screwing for the benefit of a select few executives and investors. Sounds like Mr. K found a way to be at the front of the line.

From Chicago Tribune today:Delphi boss warns workers
Miller says more jobs will be lost if UAW members walk out

By Rick Popely
Tribune staff reporter
Published October 13, 2005

As angry union workers at Delphi Corp. threaten to strike over wage cuts, the chief executive of the bankrupt parts supplier warned Wednesday that such a move could put more workers in danger of losing their jobs.

"I think they understand that nothing could be gained by a strike except to hasten and expand the number of plants that might have to close," CEO Robert S. "Steve" Miller said at a press conference in Detroit, adding that he doubts that United Auto Workers members will walk out.

"This union does not look to me like AMFA, which took a suicide walk off the cliff at Northwest Airlines," he said, referring to the Aircraft Mechanics Fraternal Association, which struck in September. The airline is hiring replacement workers for the striking mechanics.

"The best thing they can do for their own financial security is to stay on the job," Miller said.

The UAW, which represents 24,000 workers at Delphi, had no comment on Miller's remarks or warnings at union locals that a strike is possible.

UAW Local 686 at a Delphi plant in Lockport, N.Y., near Buffalo told members in a flier distributed Tuesday that the union could strike over the deep cuts in wages and benefits the company is seeking. About 4,000 UAW members work at the plant.

Delphi, which filed for bankruptcy Saturday, wants UAW workers to accept wage cuts to $10-$12 an hour from the current $27 and reductions in benefits to match what other suppliers pay.

Paychecks for union workers at Delphi could get smaller next spring under a timetable set in bankruptcy court. The company will send proposals to its unions by Oct. 21 and negotiate until Dec. 16. If no deal is reached, Delphi will ask the court to void its union contracts in January.

Union members expressed frustration, however, that they have not seen anything.

"If you're serious about getting the negotiations done by Dec. 16, you ought to talk to us," said a UAW official who asked not to be named, directing his remarks at Miller.

Miller said he is confident Delphi can work out agreements with the UAW and its other unions despite growing rancor among workers facing huge pay cuts.

"I don't blame these people. They are being hurt. Their expectations are being dashed," he said.

Miller expects the company to emerge from bankruptcy in two years and said he is counting on General Motors Corp. to continue to be a major customer. GM, which spun off Delphi in 1999, currently accounts for about half of Delphi's $28 billion revenue.

"I am asking General Motors for one thing: Give me a full, fair shot at your business," he said. "I don't expect [GM] to give it to me out of charity. Just give me a fair shot."

Miller repeated his warnings that if GM doesn't win concessions from the UAW, it could join Delphi in bankruptcy. UAW workers at GM and Delphi receive the same pay and benefits.

"I do not think it is imminent. I do not think it is likely," Miller said about the chances of GM going bankrupt. "My only call to action is, you need to do something or you are at risk of ending up where Delphi has ended up."

GM has been trying to reach an agreement with the UAW since April to shift more health-care costs to workers. The current UAW contract runs for two more years.

----------

rpopely@tribune.com

Not a very subtle way of threatening unions - "if you threaten to strike, you are on the short list of having jobs erased."

Gosh! I do not relish being in a position to say, "I told you so." This outcome is one I predicted for both Visteon and Delphi when they were spun off. The only difference is that my timetable is off by a year or two, simply because I did not factor in the "terror card" and "natural disaster" card which have accelerated some aspects of the automotive sector (fewer SUVs sold because war on terror and natural disasters have combined to push fuel prices) which makes more and more parts manufacturers in the US obsolete.

Note the Delphi CEO has stated on other occasions that his overseas operations are profitable. Look at the new wage structure that will occur. $10 an hour might allow a guy to live like a prince in China, but it's only about the wage of a fry cook at McDonald's here in the U.S.

I have a feeling that this is all cyclical, and the American manufacturers are coming to the natural end of an inordinately long reign. There was a whole lot of technological advance in the 20th century, most of it centered in the US, and the automotive industry rode that wave. Nowadays, with the international proliferation of access to technology and materials, it stands to reason that the US manufacturers would fall victim to their own complacency (as Deming predicted) and the upstarts (who listened to Deming) with everything to gain and nothing to lose would gain ascendancy.

Because of the furious pace of technological advancement, we can expect the cycles to become shorter (forget about 100-year reigns, a la Ford & GM). There’s already evidence that Toyota, et al are maybe getting too big for their britches, and the Koreans are making some serious noise. Hyundai isn’t much different that Toyota was thirty years ago, although their pace of quality improvement has been quicker. And how long do you think it will be before the Chinese start getting serious about manufacturing cars?

I have a feeling that this is all cyclical, and the American manufacturers are coming to the natural end of an inordinately long reign. There was a whole lot of technological advance in the 20th century, most of it centered in the US, and the automotive industry rode that wave. Nowadays, with the international proliferation of access to technology and materials, it stands to reason that the US manufacturers would fall victim to their own complacency (as Deming predicted) and the upstarts (who listened to Deming) with everything to gain and nothing to lose would gain ascendancy.

Because of the furious pace of technological advancement, we can expect the cycles to become shorter (forget about 100-year reigns, a la Ford & GM). There’s already evidence that Toyota, et al are maybe getting too big for their britches, and the Koreans are making some serious noise. Hyundai isn’t much different that Toyota was thirty years ago, although their pace of quality improvement has been quicker. And how long do you think it will be before the Chinese start getting serious about manufacturing cars?
That may all be true, but what does the worker caught in the vice do?
It is obvious that trying to maintain status quo vis a vis unions is an uphill battle, because the jobs are no longer local and the equivalent of "scabs" willing to take the job at less than union wage and benefits has expanded exponentially with the expansion of the global economy.

Moving from industry to industry just delays something apparently inevitable - a flattening of all wage labor to the lowest common denominator. Employers do not perceive real value in an American worker compared to an overseas worker to justify a disparity in wage. Whether there is real value is immaterial, since the employer goes by perception, not reality.

To maintain a wage disparity, the workforce must change the perception. I don't have a clue how to do that.

I don't have a clue how to do that.
I'm with you. It's really a novel situation because our trip on the cycle lasted for so long. In some ways it's like the NO/Katrina situation--everyone knew that the levees were a problem, but because the potential for disaster was unthinkable, no one wanted to think about it for very long. Out of sight, out of mind, I guess. And like the Katrina situation, with everyone now scrambling for someone to blame (and everyone from George Bush to a Vengeful Thundering God has been blamed), we have a sort of a glazed look in our eyes as this whole thing crumbles and no one has any idea what to do about it. Maybe we have to just let it fall under its own weight, pick up the pieces as best we can (helping displaced workers however we can, just like victims of Katrina) and try to do a better job next time.

That may all be true, but what does the worker caught in the vice do?
It is obvious that trying to maintain status quo vis a vis unions is an uphill battle, because the jobs are no longer local and the equivalent of "scabs" willing to take the job at less than union wage and benefits has expanded exponentially with the expansion of the global economy.

Moving from industry to industry just delays something apparently inevitable - a flattening of all wage labor to the lowest common denominator. Employers do not perceive real value in an American worker compared to an overseas worker to justify a disparity in wage. Whether there is real value is immaterial, since the employer goes by perception, not reality.

To maintain a wage disparity, the workforce must change the perception. I don't have a clue how to do that.

My daughter was in a meeting yesterday with the Gov. of Michigan addressing some of the displaced worker issues, and in particular Delphi.She said the state is going to provide funds for ex-Delphi workers to go to school and get retraining for other career choices. However, as Wes stated, she did not mention the problem with location, or re-location, and the older workers in their 50's and 60's. Other companies are not going to hire older workers even if they get re-trained/educated.
This was pointed out by a man in the crowd asking what does the state plan for those type folks. She indicted she had not thought of that particular age group scenario, but will have to regroup with other state officials.
I beleive Michigan wants to help, but I don't think they have any idea of the scope of the financial problems that will be faced by these unemployed ex-Delphi workers.
I was quoted a figure of 14,000 people now work for Delphi in Michigan. Wonder how many will survive the cuts.

My daughter was in a meeting yesterday with the Gov. of Michigan addressing some of the displaced worker issues, and in particular Delphi.She said the state is going to provide funds for ex-Delphi workers to go to school and get retraining for other career choices. However, as Wes stated, she did not mention the problem with location, or re-location, and the older workers in their 50's and 60's. Other companies are not going to hire older workers even if they get re-trained/educated.
This was pointed out by a man in the crowd asking what does the state plan for those type folks. She indicted she had not thought of that particular age group scenario, but will have to regroup with other state officials.
I beleive Michigan wants to help, but I don't think they have any idea of the scope of the financial problems that will be faced by these unemployed ex-Delphi workers.
I was quoted a figure of 14,000 people now work for Delphi in Michigan. Wonder how many will survive the cuts.
I'm at the young end of retirement age (older than boomers, slightly younger than the Deity) and my first thought goes to those folks who were looking toward a manageable retirement who will lose retirement benefits, including healthcare AND income.

I have contemporaries who were pilots for major airlines, looking forward to $100,000/year pensions who now get less than 1/3 of that. They no longer can make mortgage payments, take vacations, enjoy free flight perks. Even going out to dinner and the theater with their wives entails beans and franks the following week to make up the deficit. Golf club memberships are out and daily fee links are in.

They are too young for medicare, too wealthy for food stamps, too proud to be a greeter at wallyworld. Who else wants to hire a guy between 60 and 66 who pretty much only knows how to fly a plane and socialize. Most of these guys learned to fly in the service and haven't had any other job or training for 30 years except training for newer and bigger aircraft.

I'm reminded of telegraph operators once telexes came into common use. Who needed a guy who could send Morse Code, when any fool could type a message that would still be understandable even with some typos? Better yet, who needed a guy who could receive Morse Code if the message came typed in real words?

Entire lines of work disappear every day. I remember a time when there were three typewriter repair shops within a block of each other in downtown Chicago. When IBM brought out the typewriter with changeable font on a ball, then there was only one. When PCs first started catching on in the early eighties, there was a brief resurgence because some offices preferred the crispness of the IBM ball (now driven by a PC) to the faint 9 pin dot matrix printer. Once the 24 pin printer came out, the typewriters took up residence with dodos and passenger pigeons.

When laser printers got cheaper, folks sidelined the dot matrix printers (I've got 4 in my garage plus a genitec line printer!) for the neater, quieter laser and color inkjets. Now, color lasers are becoming affordable and folks are rethinking commitment to inkjet.

Progress continues to take place. People and entire industries become obsolete in the blink of an eye. On a macro-economic scale, they (the obsolete industries and career paths) are acceptable, almost welcome, changes which are the mark of a fluid, vibrant economy. On the micro-scale, the changes are horrid personal disasters which destroy families and lives.

(Think of war - politicians and nations savor a war they've won. However, the cost of a won war is always in horrible personal outcomes for thousands of humans on all sides of a war. - Similarly, if the top brass in the automotive supply chain avoid a Domino Theory downfall as Delphi goes through its death throes, they will breathe a sigh of relief, congratulate themselves on their business acumen, and ignore the disruptions to the lives and careers of the rank and file working for them.)

Although I don't have a significant stake in the Delphi situation, I do have several years of pension benefits, including my contributory percentage, in Visteon's retirement plan. This is company retirement, not stock or investment savings so I can't move it into something a little less risky. It is not a huge benefit, but at the current estimated monthly payout, it would be nice to have at retirement. I have made some adjustments to my personal portfolio to compensate for the likelihood that their fund will default before I get to retirement age. If I am wrong about Visteon and my investments don't belly up, then good for me.


Travlinman --

This may or may not pan out, but some of these pension plans will pay off a
person with a few years, just to avoid the recordkeeping headaches. They
should send you a pension plan annual report; write to the pension people
and ask them if they will cash you out. You can roll the money into
an IRA and avoid any tax liability.

Note that this is strictly voluntary on their part... but some of the funds do this.

By the way... I am in agreement with many of your thoughts on how Delphi and Visteon got there...

Regards,

Brad

At least whatever shakes out will be called Delphi. Visteon is splitting and as of Oct. 1 the commpany name will be either Visteon or ACH (American Components Holdings) depending which plant you supply. Then we hear that as of Jan. 2006 these plants will revert to Ford as the owner.

So...now we ship to a plant that is ACH designated rather that Visteon.
This now poses the question "Are the Visteon Customer Specific Requirements still in effect for ACH?" We are trying to find out, my boss is calling his contacts at Visteon to see if anyone knows these type details yet.

Anyone else find out anything about this?:confused:

Today's news. Note the sidebar (top bar in this post):

What this means
To UAW workers: "A step in the right direction," the union said. Delphi will delay until at least Feb. 17 the date that it could ask a bankruptcy court to throw out its union contracts. That allows more time for the union and Delphi to negotiate.

To Delphi: A chance to avert a strike. A walkout could be a fatal blow to the supplier, which is in Chapter 11 bankruptcy.

To General Motors: Time to stop a destructive chain reaction. A Delphi strike would stop the flow of parts to GM's plants, threatening its financial future. GM might need to give Delphi financial assistance.
Auto news
Delphi backs off huge job, wage cuts
GM joins bid to avert strike
December 20, 2005
BY MICHAEL ELLIS
FREE PRESS BUSINESS WRITER
Delphi Corp. said Monday it has withdrawn the contract proposal it made last month that angered the UAW and increased the chances of a strike.
The move could defuse a volatile situation. It allows the supplier and the UAW to negotiate new wages and avert a work stoppage that threatened to break up the company and potentially drag down General Motors with it.

GM, in a move to avert a strike at its largest -- and the nation's largest -- automotive parts supplier and continue the steady supply of critical components, has recently entered into discussions with the UAW to work toward a labor agreement with Delphi, Delphi said.

"Now I'm thinking that GM is a little bit worried because a strike is a definite possibility. Because I'm ready to go," said Tom Durbin, a union worker at a Delphi brake plant in Dayton, Ohio. "It's my understanding that we make more than 50% of brake products for General Motors."

Strikes at two Delphi plants in Flint in 1998 effectively halted GM's vehicle assembly plants across North America for about two months, costing the automaker an estimated $2.2 billion and causing its sales and U.S. market share to slump.

Delphi filed for bankruptcy Oct. 8 after efforts to win labor concessions from its unions and bailout money from GM failed.

The Troy-based supplier of such products as radiators and satellite radios expects to emerge from bankruptcy in summer 2007, after it uses the court's broad powers to cut the wages and benefits of its 34,000 hourly U.S. workers.

A GM spokeswoman declined on Monday to talk about discussions with Delphi or the UAW.

Delphi Chief Executive Officer Steve Miller told the Free Press previously that GM could possibly help engineer a "soft landing" for some Delphi workers in the form of buyouts, early retirement offers or other incentives.
GM's involvement could make a tough contract more palatable, he said.
In November, GM Chief Executive Officer Rick Wagoner said in an interview with the Free Press that the risk of a Delphi strike "is the kind of thing that leads rational people to sit down and work through a constructive solution."

With GM now involved in the bargaining, Delphi said Monday that it will delay until at least Feb. 17 the date that it could ask a bankruptcy court to throw out its union contracts, the second time the company has pushed back the date to allow more time for negotiations.

In October, Delphi said it planned to file a court request to terminate the contracts by last Friday, but last month it delayed that date until Jan. 20.
In mid-November, Delphi's unions said the company submitted what it termed its final offer, which included wages from $10 to $12.50 an hour for its U.S. hourly workers, as much as a 63% reduction from current wages averaging from $25 to $27 an hour.

Delphi said Monday that the contract proposal was based solely on its own "financial constraints."

UAW President Ron Gettelfinger said that Delphi's proposal -- which included plans to slash 24,000, or 60%, of union jobs -- was such an insult that there was no sense letting workers vote on it.
UAW Vice President Richard Shoemaker told union leaders earlier this month that "a strike appears more likely than not," against Delphi, according to a UAW spokesman who attended the meeting.

But on Monday, Gettelfinger and Shoemaker said in a news release that Delphi's announcement was a "step in the right direction."

Delphi said that reaching an agreement with the UAW will help preserve the company, provide viable jobs in the United States and better serve its customers.

In recent weeks, UAW leaders and Delphi workers have stepped up their opposition to the contract proposal from the parts supplier.

The Soldiers of Solidarity, an organization of UAW members who say they have grown tired of their union leadership, said last week that the group will picket the North American International Auto Show on Jan. 8 in Detroit.

Thousands of workers in Michigan, Indiana and Ohio also rallied against Delphi on a weekend earlier this month.

Rod Lache, an auto analyst at Deutsche Bank Securities Inc., said earlier this month that a 3-month strike at Delphi alone would force GM, the world's largest automaker, into bankruptcy court.

David Cole, chairman of the Center for Automotive Research in Ann Arbor, has said that a strike at Delphi, which supplies components on all GM vehicles, would force GM plant disruptions within two days.
Contact MICHAEL ELLIS at 313-222-8784 or mellis@freepress.com

When politicians do with other governments what Delphi management did with its employees, it's called "saber rattling," meaning the opponent should quake in his boots because the belligerent merely shakes its sword, implying a terrible fate if it should actually wield the sword, so "You'd better do what I say, or else . . . !"

Problem is: "What do you do when someone calls your bluff?"

One thing I have NEVER understood (and I worked in that Delphi Brake Facility as a Student)... What good does a strike really do you?

Especially in this case, a strike by the Union would just be a case fo the Union cutting it's own throat (not uncommon)...

UAW strikes
Delphi goes from reduced wages to closed (no wages):bigwave:
GM work is stopped (rapidly in this lean manufacturing JIT world) :frust:
Delphi gets courts to approve anything they desire (even lower wages and benes) :mad:
GM goes into bankruptcy :yes:
GM no longer willing or able to "bail out" Delphi :mg:
GM goes after UAW and the workers (again with the lower wages and benes) :eek:


In the end, the UAW and the workers lose across the board. I can understand that this looks like a no win for the workers, but ****ed if they aren't just pouring gasoline onto thier own funeral pyres. :bonk:

Am I missing something here?:confused:

OH - and I LOVE the Soldiers of Solidarity bit...:biglaugh: The Union infighting and corruption has just begun to blossom... this will be interesting!


Brian

It's a long article in the LA Times (http://www.latimes.com/news/printedition/la-na-delphi30dec30,1,7152857.story), but worth the read: <snip>
"When the history of this period is written, Delphi will be viewed as the tipping point where the auto industry either got its act together or failed," said David E. Cole, the son of a former GM president and head of the Center for Automotive Research, based in Ann Arbor, Mich. "The spillover to the rest of the economy is going to be tremendous."

For Seibert, 56, the spillover was immediate. That's because in addition to his pension, he had been socking away money in a company-administered savings account similar to a 401(k). Unfortunately, he had directed almost all of its $84,000 balance into Delphi stock. When the company declared bankruptcy, its shares plunged from a 12-month high of $9 to 33 cents, all but wiping out his account.

The result: "I'm not going to be retiring anytime soon."
</snip>

Also see: Delphi - bankruptcy strongarm tactic? (http://elsmar.com/Forums/showthread.php?t=12986)


Abandon ship! Every person for themself!

I just hate it when I run around crying, "The sky is falling! The sky is falling!" and it actually does fall.

I really and truly predicted this very scenario when GM & Ford divested Delphi and Visteon. I ranted and raved, but folks said, "You're crazy! That can't possibly happen! There's too much "big money" behind them."

:topic: Now . . . if only I could predict success like I can predict disaster! The long history of prophets shows most predicted disaster. No famous ones come to mind who predicted peace and happiness and were on the money.:frust:

Nothing new to me. When I was 15 (1965) my father gave me his 'Father to Son' talk. His three main focuses:

He gave me a copy of Catch 22, told me to read it and to never join the military (he served in WWII and Korea).

He told me to plan for my retirment myself because social security would probably not be there and that no company could be trusted with pension money (to be fair, I should say he was a republican and he said the same about union managed retirement funds which, it turns out, are more likely to be solvent than those of companies like GM, et al - All my electrician, carpenter and pipefitter friends whose unions control their own pension funds are doing nicely so far).

He told me to shy away from stocks. He advised Las Vegas if I want to gamble.

***************

For those who remember the early 1960s, I think that was tabout the time the company that made the 'Lark' (remember Mr. Ed's sponsor?) went bankrupt (was it Studebaker?), and not even pension funds were saved. In a PBS documentary about the bankruptcy they spoke with one family with 3 generations (one fellow was in his early 20's) all of which worked there and all of which lost everything.

NOTE: I did look for the Studebaker history - http://en.wikipedia.org/wiki/Studebaker - and don't see bankrupcy mentioned so I might be wrong about the company. I am remembering a documentary I saw on PBS some years ago so my memory is vague. I do remember the subject of the documentary was company pension funds and how americans, by the 1960's, had a firm belief in assured futures based upon the continued solvency of large companies and retirement promises (pension plans). It was 'part of the american dream', so to speak. It also illustrated a turning point where people started trusting companies more than unions (in short the start of the decline of unions).

Just some thoughts....

Just to confirm:
Studebaker was sponsor for Mr. Ed (see photo for documentation)

Bankruptcy: No bankruptcy. Studebaker simply stopped making cars and sold their other lines of business. This brief history of the family and company should answer most questions. http://www.studebakerfamily.org/history.html

Side note: Short phrase to describe "end days" for Studebaker"
"Great design, terrible engineering and execution."

:topic: I LOVED the look of the Avanti.

Even more :topic:
I have a great story to tell about my aunt, a new Studebaker that was a lemon, a Studebaker dealer, and my aunt's employers (a team of union organizers - the guys who dealt with company toughs and scabs), and how my aunt ended up driving the dealer's own Cadillac for a year until the dealer finally bought the Studebaker back from my aunt at 100 cents on the dollar of original retail.

I do need at least one margarita to get started, with more to prod my memory as the tale progresses.:rolleyes:

I found this interesting sidebar in a Coopers Lybrand promotional brochure:
EXHIBIT 11: THE TOP FIVE PLANNING MYTHS

We’ll all win as long as volumes stay high
In 2000, when market volumes peaked, there were a number of high-profile automotive bankruptcies, including Federal Mogul, Hayes Lemmerz and Oxford Automotive.

We’ll all lose if volumes drop
In a depressed automotive market the goats soon climb higher than the sheep. Strong companies gain market share, while weak companies lose market share and may even be driven out of business.

Our organisation is so broad that it can offset the impact of any single risk
This is rarely true. Most business portfolios are dependent on a relatively small number of programmes for their profitability and scale, so their risk is not spread as much as management thinks it is.

All new business is good business
One of the biggest problems currently facing many automotive companies is how to deal with unprofitable business acquired to sustain volumes or increase market share.

Going to China or India or Latin America will solve all my problems
Emerging markets offer real opportunities and major risks – and the automotive industry has a track record of rapidly exporting its structural problems to new markets.

Wes's Comment:
Seems to me, many auto execs ought to have these on a little card, printed in reverse, stapled to their foreheads to read every time they look in a mirror.

Today in the most prestigious Portuguese newspaper there’s an article written by a University teacher about the problems in GM.
Perhaps a non USA view about this may help.
He wrote that the main problem with GM, was that they are making cars that don’t fit in lots of people modern concept.
For example here in Europe we have cars with only 1400 cubicle centimeters, they “eat” only 5 or 6 liters of gas to make 100 km. GM makes SUV in USA with engines 4 or 5 times larger than those we have here, that are completely anti environment, and normal people in USA are thinking a little more about that, than they used to. (Not so much because of a larger environmental conscience, but mainly because oil prices that are higher now).
GM factories in Europe are not having problems and they cars and auto components are selling well...:confused:

FWIW:
Delphi is driving the last nail in the coffin of its labor force.Delphi to ask court to nix labor contracts
Delphi Corp. (DPHIQ) is set to ask a bankruptcy judge to tear up the labor contracts it has with its 33,000 U.S. workers, enabling the company to ratchet up pressure on unions to accept deep pay cuts, the Financial Times reported on its Web site Wednesday.

The court application, part of a package of measures to improve competitiveness, will probably come in February. Delphi will also ask the bankruptcy court to nullify supply contracts with General Motors Corp. (GM), Delphi's former parent and biggest customer, saying it's incurring heavy losses.

It's unlikely Delphi would try to impose new labor contracts for at least two or three months. "You need to create the environment for consensual agreements. That means continuing with talks," said someone familiar with the plans. However, "everybody understands that labor is going to be restructured," he added, according to FT.

When Delphi sought Chapter 11 protection last October, Chief Executive Steve Miller warned that "our labor contracts are simply unaffordable and must be changed." CEO Miller appears to be as good as his word.

(In a related issue, did you note "bottom feeder" investor Kirk Kerkorian has amassed nearly 10% of GM stock while its price is wallowing in the gutter?)