So says Robert “Steve” miller, CEO of Delphi as it filed for bankruptcy in an interview with the WSJ. He argues that almost every one of the ills that has brought down Delphi can be found in other U.S. automakers, airlines and other industrial corporations.
He says that companies like Delphi have become noncompetitive in the relentless globally competitive environment mainly because of the legacy costs that GM and other automakers have piled up during their sunny days of monopoly in the 60’s and 70’s.
Miller knows whereof he speaks. He joined Lee Iacocca in the rescue of Chrysler.He presided over the bankruptcy of Betlehem Steel before turning that dead hulk over to his friend and mentor, W.L.Ross.He was also present at the bankruptcy of Federal Mogul, another automotive supplier. He is now on the board that oversees the bankruptcy of United Airlines.He is also on the board of several corporations.He has earned his stripes as a remorseless cost cutter.Lest we think he is one heartless SOB, he begs to differ.He says he has to do this to make our corporations competitive and save the jobs worth saving.
In his drive to save Delphi, he has asked the workers to accept wages from $9-10 per hour a steep decline from their current $27-30 per hour wages and generous benefits.He plans to close many of Delphi’s North American plants and have the work performed overseas, mainly in India and China and we know what that means.This will go on until Miller gets rid of all the pension and health costs for past and present employees.That will make the company attractive to people like W.L.Ross, a vulture hovering over the near dead carcass of Delphi.W.L.Ross was an admirer, needless to say, of Miller and has expressed an interest in picking up Delphi after its legacy costs, pensions and benefits are stripped and the corporation is made more “valuable”.And, the Indian billionaire, Laxmi Mittal, who bought a portfolio of bankrupt steel companies from W.L.Ross, is said to be interested in picking up a similar portfolio of auto parts companies from his old friend, W.L.Ross.The world has indeed become a small place, may be even flatter, as Tom Friedman would say.Everything that stands in the way of these men is being flattened.
I also saw today that Miller warned the UAW not to strike.
Detroit is dying. Did you happen to see this story in the Free Press?
I am unsure if recovery is possible; I don’t think it is without some kind of massive bailout. But from who? Does China want to buy the Motor City?
As a much younger man, I saw the gradual decline of all our steel cities– Pittsburgh, Youngstown, Bethlehem– until many of them folded.A year ago, while visiting some relatives, I went to Dearborn and caught the distinct odor of death that I became familiar with in my younger days.
With steel and autos gone, a way of life is going to come to an end.And with it the dreams and upward mobility of millions of people that made American waht it is.I have no idea what will take its place.But whatever it is, it is not going to be the America that drew my parets over to this country.
A sad, sad turn of events.
I also saw the demise of the steel industry.I grew up about halfway between Pittsburgh and Youngstown.It was on life support when I was in high school.Pretty much everyone left,as soon as they could,including moi.No future there. All the small cities that depended on industry were on life support.
Some years later,after hub and I had moved back there to take care of aging relatives,hub was a witness to an ENTIRE steel mill being packed up and sent to China from Youngstown .Or north of Y-town somewhere,not far.(circa 1991 or 2)
It was then that it became clear that heavy industry was dead and gone in the Ohio Valley.(and Mahoning Valley).
That was the end, and there has been no stopping it since.Detroit has hung on somehow, but with heavy ,heavy costs. I think my generation will be the last to have had that comfort zone of a steady job at high wages.Not that they were easy jobs, NO WAY. But steady,with bennies,enough to raise a family.
So
The workers lose everything
The small investors lose a lot
The govt gets left holding the bag (pensions, etc)
The fatcats get richer.
If an industry has to go bankrupt, there has to be a fairer way to do it. How about simply not letting the company restructure away their legacy costs? Liquidate or stay in business. Make those CEO types earn their pay. Figure it out, or lose everything you’ve got.
GM and the entire U. S. auto industry self-wounded back in the days of the first energy crisis. That was a hard shot across the bow, liberally reinforced by the legacy of racism in Detroit.
From 1950 until now, Detroit went from being named America’s most beautiful city post WWII, to being America’s poorest city this year. It is still a beautiful city, but people are insanely fearful of the city, and racist attitudes persist. Honestly, I think the state outside of Michigan would quickly expel the city from the state if they possibly could. Since they cannot, we have a long, slow attrition of resources to the city, such that (for one example), the state’s basic foundation for schools sends about $7500 per student to Detroit, and more than $10,000 to Birmingham in the adjacent county. There is no way on earth that is fair.
I think that having developed an easy attitude toward cutting off a major section of your populace makes it easy for corporations and their boards and stockholders here to strive for profits in whatever way they can over the short term, even if this causes great damage in the long run.There is absolutely no sense of obligation other than to do whatever maximizes profits. None. And Delphi is just getting attention, because it is likely to bring down our country’s largest corporation.
This is just one end point of something begun long ago, it’s not the start of a new downward spiral. If you think the s#@t is just now hitting the fan in Detroit, it’s because you haven’t seen what’s already happened. The auto industry has been feeding off itself for a long time: workers make machines, which are leased to workers (rarely sold to them), with deep discounts, so the factories can be kept running. It isn’t quite a Ponzi scheme, but it has some of the elements
Seeing vehicles here in metro Detroit is like entering a bubble of very large U.S. make autos, as so many of the auto industry workers and their allied businesses drive the largest and least efficient vehicles. I think the constant visual effect further lulls GM and others in to thinking that they are still on the right track.
We should be making the best, most fuel efficient, safest and most reliable vehicles in the world. But we are not, because the industry has persisted too long in thinking that “if its good for GM its good for the rest of the nation” really means “whatever GM does will be naturally bought and accepted by everyone in the nation , and there is no need to look any further than next quarter’s profits”. Ford has a bare chance of changing their direction, but I don’t know if they are changing fast enough, nor if their board and stockholders will allow them to make changes that will lower their profits in the short run to gain future benefits. . Delphi was spun off from GM to increase GM’s profits quickly. That is the model.
So the companies do what we all should have expected: they run to other countries. Will this lower the price of goods as promised? No. Why should companies lower their prices when they can make higher profits by reducing manufacturing costs and still sell at current prices? The only glitch in this “rosy” scenario, is that GM and Delphi constitute one of the largest chunks of GM’s market for vehicles. I doubt that the world market is ready to buy American vehicles of current quality at the present prices, and we will be seeing many many of our citizens lose their present standard of living.
I’m expecting Michigan to become the leading edge of a severe recession at a minimum, if not worse.
I think that GM and Ford have become dinosaurs in an age where monopoly is passe’.When they had carved up the market,as in the 70’s,it was possible for them to make look alike models with different hood ornaments and grilles, using a single tool and crank out millions of the same cars.The consuming public, lacking choices, had no place to go except to these dealers to buy their cars.
When wave after wave of foreign cars arrived with more efficient and pleasing appearance, the public suddenly had more choices and the days of producing the same cars with large volumes were gone.GM and Ford, which saddled themselves with large overheads in the fat and happy days were unable to adjust themselves to the new realities.Now,every car company has to be able to produce multiple models, update them frequently and provide new technologies to maintain and improve efficiencies. That seems to be beyond the capacity of GM and Ford.
Even in the parts making business, where GM and Ford have spun off Delphi and Visteon, they seem unable to keep up with Denso, the formidable Toyota arm.Denso, which has established a sleek plant in Battle Creek, of all places,is considered the creme-de-la-creme of auto parts making.To be able to acheive this reputation in Michigan using Michigan workers when GM and Ford cannot do it says a great deal about the level of quality and efficiency Toyota has achieved.As usual, GM and Ford will blame its workers for asking for health and retirement benefits.It is clear that is not where the fault lies.
“The fault, dear Brutus, lies not in our stars, but in ourselves”.