[Marxism] "These were the aristocrats of labor"

Marvin Gandall marvgandall at videotron.ca
Mon Oct 10 06:53:47 MDT 2005

With Delphi Filing, Tougher Times for Auto Industry Workers
New York Times
October 10, 2005

DETROIT, Oct. 9 - When Delphi, the nation's largest auto
supplier, filed for bankruptcy on Saturday, it was the latest blow to the
American auto worker's gilded age.

Ninety-one years ago, Henry Ford shocked corporate America by abruptly
announcing that he would roughly double his workers' average wages, to $5 a
day. For the first time, many Ford line workers could afford the Model T's
they were assembling.

In recent decades, once-powerful labor unions like the Teamsters and United
Steelworkers and, most recently, airline workers have been in retreat. At
the same time, the United Automobile Workers, Delphi's largest labor union,
has maintained some of the highest wages and most generous benefits in
industry, even as its membership has been cut in half since the 1970's.

But the bankruptcy filing will be a major test.

"It is a crossroads," said Gary N. Chaison, a professor of industrial
relations at Clark University in Worcester, Mass. "These were the
aristocrats of labor, and now they're in the position that their jobs are
going to become lower-wage manufacturing jobs, as if they were producing

"The ramifications from Delphi are going to be tremendous," he added. "The
union is going to have to assume a defensive position, and this is a union
that's used to being on the offensive."

The challenge comes as the A.F.L.-C.I.O., which includes the auto workers'
union, is going through an identity crisis. A few prominent unions have
recently split from its ranks in a dispute over how best to salvage the
labor movement. Should the U.A.W. be forced into major concessions for
Delphi, or should the bankruptcy court force a sharp cut in wages and
benefits, it would influence the U.A.W.'s negotiations with General Motors,
Ford and the Chrysler division of DaimlerChrysler to replace its labor
contract, which expires in 2007.

Delphi, a division of G.M. until 1999, is seeking to cut pay for its 34,000
unionized workers by as much as two-thirds, to as little as $10 an hour. One
union local pointed out in a letter to its members that at those wages, they
could no longer afford to buy the new cars that contained the parts they

"You couldn't even afford the gas," Douglas A. Fraser, the former president
of the U.A.W., said in an interview on Saturday. "The guys, particularly the
veteran guys, are willing to do something, but not completely emasculate the

Whether Delphi, which has lost $5.5 billion over the last six quarters, can
actually succeed in making such steep cuts, even while in bankruptcy,
remains to be seen, and the union could strike if its contract is canceled
in court.

What is clear is that the enviable wages and benefits Delphi workers have
enjoyed are going to be harshly recalibrated to account for global
competition, and that more of the company's work will be shipped abroad. And
the cuts that have swept through domestic auto suppliers - several others
are already bankrupt - are seen as a likely prelude to changes that will
eventually reach G.M., Ford and Chrysler, as they have swept through other
old-line American industries struggling to compete globally.

"If we're going to operate these factories, we need competitive wages and
benefits," Robert S. Miller, Delphi's chairman and chief executive of the
last three months, said in an interview on Saturday. "I don't think this is
the end of life as we know it, but our customers won't pay for these premium
wages and benefits."

Bill Wineland, a 49-year-old line worker at a Delphi plant in Flint, Mich.,
had a different perspective.

"Who's going to afford to buy these cars? Nobody making $10 or $12 an hour
can afford a $30,000 automobile," he said. "Henry Ford said a long, long
time ago that people should have enough money to buy my product. Everybody
thought that was crazy, but he made it work."

Mr. Ford was by no stretch of the imagination a saint, or even particularly
consistent. In his later years he would cut wages, and his company would
have bitter confrontations with the fledging unions. But his $5-a-day wage
was a transforming event. Within a week of Ford's announcement in January
1914, more than 10,000 job seekers descended on a Ford plant despite
near-zero temperatures and blizzards, leading the police to turn fire hoses
on the crowd in a failed attempt to prevent a riot.

"We want those who have helped us to produce this great institution and are
helping to maintain it to share our prosperity," said James Couzens, Ford's
treasurer at the time and the man many historical accounts credit with the
idea of the $5 wage, in part as a motivational tool.

Of course, Ford did not have to compete against Toyota, Honda and Nissan
then. Or against the wages and benefits offered in Mexico or China or
Thailand. And therein lies the unraveling of the compensation that was
negotiated over decades by the U.A.W., including health care coverage with
no monthly premiums and formidable protections against loss of jobs.

Jonathan Steinmetz, an analyst at Morgan Stanley, said he did not see the
Big Three necessarily coming to the same crossroad as their domestic
suppliers. The competitive pressures are intense, but not the same, because
Toyota and other foreign competitors are building more plants in the United
States and paying wages and benefits somewhat comparable to the Big Three's.
Automobiles sold in the United States are not yet being assembled in China,
though parts are being made there.

What will not likely be sustained, however, are the benefits. G.M. spends
$1,500 a vehicle on health care, more than it spends on steel. Every
American G.M. worker supports nearly three retirees.

"It's hard to have a deflationary environment for car prices and health care
inflation of 10 percent," Mr. Steinmetz said.

Delphi's filing could push G.M. closer to a revamping. Delphi said in its
bankruptcy filing that it would seek to stop paying health care and life
insurance benefits for its 12,000 American retirees. G.M. had agreed to pay
those benefits in the event of bankruptcy. And while Delphi's pensions could
potentially be the latest multibillion-dollar plan thrust on the government,
G.M. also agreed to pay pension benefits above the portion the government

In all, G.M. said this weekend that the filing could increase the long-term
liabilities on its books by as much as $11 billion. Having lost more than $2
billion in the first half of 2005, G.M. can ill afford new financial

The Delphi that emerges from bankruptcy will have a smaller, poorer work
force. Currently, Delphi's American workers make about $65 to $70 an hour
including benefits, more than 10 times, at least, the compensation of
workers doing similar jobs in Mexico and China. Delphi wants trims that
would take that below $20 an hour, in part by cutting wages to $10 to $12 an
hour from $26 to $30.

Workers were particularly embittered when Delphi made an 11th-hour move, a
day ahead of its filing, to sweeten substantially the severance packages
available to 21 top managers. The company said it was a necessary step to
retain executives.

"It's a slap in the face," said Al Coven, president of a union local in
Saginaw, Mich. "They've always done stuff like that. Over the years we've
had downturns in the economy. We give stuff up and they turn around and give
their executives big bonuses."

More information about the Marxism mailing list