Tuesday, June 27, 2006

Delphi's buyouts steer past crisis only for moment

Monday, June 26, 2006
Daniel Howes
Delphi's buyouts steer past crisis only for moment

Delphi Corp. folks mulling buyout offers may be angry and understandably confused, but they're heading for the exits anyway -- right on cue.

The growing willingness of hourly workers to take the dough and run is a clear sign that the bankrupt auto supplier and the unions that control its factory floors -- the United Auto Workers and the International Union of Electrical Workers -- are getting what they need to avert a very ugly train wreck.

The exodus is just beginning. Nearly 10,000 of Delphi's 24,000 UAW members say they're ready to go, and today Delphi is expected to confirm that the clock has begun ticking on offers to its 8,500 IUE members due to expire either Aug. 6 or 9 -- a few days before both sides are due back in a New York bankruptcy court.

"I'd say half -- at least -- will take it," a member of IUE Local 717 in Warren, Ohio, tells me, asking not to be identified until he signs his buyout papers. "They've got 'em buffaloed. The psychological warfare has worked by scaring people to leave instead of staying to fight. There's no unity. It's too dog-eat-dog anymore."

Transformation means 'go'

This is how brutal economic leverage works. A cornerstone of bankrupt Delphi's strategy to transform itself from a high-wage maker of low-priced commodities into a competitive-wage maker of value-added products depends on getting most of its $27-an-hour workers to leave.

It's as simple as it is draconian for the unions, too. To have any hope of getting concessionary contracts ratified, averting a cataclysmic confrontation, the unions need to winnow the ranks of high-wage workers to make room for lower-paid new hires likely to ratify a cheaper contract.

"In the end," says a Delphi official familiar with the strategy, "labor transformation is best done on a voluntary basis."

Especially if a primary goal is using the deep pockets of a former parent called General Motors Corp. to make problems go away without a strike. That could destroy Delphi's plant network and imperil GM itself, endangering the pensions and retiree health care bennies these gyrations are intended to save.

Exodus confirms failure

The scale of the desertion from Delphi and GM, expected to lose some 30,000 workers to buyouts, is stunning. No matter how this corporate triage plays out, the biggest prices will be paid by the hourly workers wooed from their lives on the line, the salaried folks bounced from their offices, the communities built around the tax revenue -- not the guys at the top making the decisions and paying the lawyers.

Even more, this rush toward new lives -- the fact it's so necessary -- testifies to the scale of Detroit's failure, however long in coming it may be. Laid bare is Detroit's inability to adequately anticipate the strength of its competition, to counter it and to prosper in a way that would have made so much of this unnecessary.

There's only one greater indignity possible: That after all the cutting is done, after all the plants are closed that will be closed, after all the product plans have been revised, Americans will buy fewer of Detroit's cars and trucks than they do today -- no matter what Detroit does to heal itself.

Then all bets are off.

Daniel Howes' column appears Mondays, Wednesdays and Fridays. He can be reached at (313) 222-2106 or dchowes@detnews.com.


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