Early last December some 1,000 United Automobile Workers members and supporters sat at tables in the spartan civic center of Kokomo, Indiana, listening to Democratic politicians commiserate about imminent threats to their livelihoods and the local economy. This city of 50,000 has relied on the auto industry for more than a century, since Elwood Haynes founded one of the first auto companies here. Now the local economy is dominated by four large Chrysler plants and a sprawling complex of corporate headquarters and high-tech production facilities belonging to the Delphi Corporation.
On October 8, Delphi, one of the world’s leading auto parts suppliers, declared bankruptcy, and shortly afterward its new CEO, Robert “Steve” Miller, a specialist in corporate reorganizations through bankruptcy, told workers his plan for them: cutting wages by two-thirds–to as little as $9.50 an hour–slashing pensions and healthcare, ripping up contractual job protections and eliminating the jobs of more than two-thirds of the company’s 34,000 US production workers.
“This man is on a mission to destroy the American dream, American unions and American workers,” thundered the heavy-set, white-haired UAW regional director, Terry Thurman, at the rally. “No, we draw the line here in Kokomo.”
But in industrial towns throughout the Midwest, where the auto industry is still a major economic force, the questions remain both precisely where and by what means the unions at Delphi will draw their line. The auto unions, primarily the UAW and the Communications Workers (CWA), no longer set the pace to raise standards of living for American workers, and a major rollback could have the opposite effect, intensifying assaults on “middle class” incomes of both union and non-union workers and on America’s creaky private health and retirement systems.
Delphi’s cuts would be “absolutely devastating,” says Henry Reichard, who heads the Delphi division of the CWA. “We would have the overwhelming majority of members in personal bankruptcy; or they would just walk away, since the personal bankruptcy laws have changed, making it harder to get rid of debt.” Using corporate bankruptcy laws to its advantage, Delphi could also unleash a wave of similar moves at other global companies. “If they get away with this, how many other big companies will try it?” asks Sean McAlinden, an economist at the Center for Automotive Research. “All of them.”
The Delphi saga begins with the decline of General Motors and the rise of imports, domestic production by foreign companies and independent parts suppliers. As the unions have been unable to organize the transformed industry, their share of the workforce has fallen by half, to roughly 30 percent–less in parts plants–over the past quarter-century, putting a squeeze on both workers’ wages and the unionized companies.
In 1999 GM spun off its Delphi division as part of a strategy to cut costs by subjecting it to competition with other parts makers, who are forced by the big automakers to reduce prices year after year, contributing to the current crisis: Dana, another big auto parts company, recently joined Delphi and at least five other smaller parts companies in bankruptcy. GM remained deeply involved in Delphi after the spinoff, guaranteeing retiree benefits through 2007. But Delphi won permission to hire new workers for half the wage of existing workers and without a traditional pension–roughly what the union already accepted at other major parts plants.
The plan for a gradual transition to this lower-wage future was short-circuited as oil prices spiked, GM continued to offer ill-designed products, its sales slumped, healthcare costs soared and GM’s insistence on parts price cuts–now temporarily suspended–helped drive up Delphi’s losses last year.
The UAW rejected Miller’s initial proposals and hinted at a strike at Delphi, which could cost the ailing company billions of dollars and quite possibly shut down GM. Since then Miller has made several threats to use the bankruptcy court to enforce concessions, and the deadlines have been postponed repeatedly, most recently until the end of March. The unions have tried to draw GM into the search for a solution.
One big question is how much GM is willing to pay to avoid a strike by assuming responsibility for a share of Delphi’s employees. The other side of the question is how big a hit, if any, workers are willing to take before they shut down Delphi.
“Personally, I’ve got my line in the sand drawn,” said Dennis Krontz, a union official at Delphi’s Coopersville, Michigan, fuel injector plant. “I’d be willing to take a $2-an-hour cut to help them out or help with some healthcare.” But if they push for deeper cuts, he’s ready to strike even if it kills Delphi and GM. “If I have nothing to lose,” he said, “why do I care what happens to them?”
Among Delphi workers there is widespread anxiety and anger, but especially there’s a sense of betrayal–by both GM and Delphi, by politicians of both parties and, for some, even by union leaders, whom they see as too closely partnered with management. Time and again, workers talk about Delphi’s actions as “treason” or “economic terrorism.”
In his comfortable house with limestone accents near Kokomo, Paul LaBarge sounded like a lot of Delphi employees. A maintenance pipefitter, LaBarge is a 54-year-old veteran and churchgoer who supported both Perot and Nader. Relaxing on a snowy evening before his fireplace in shorts and a UAW T-shirt, he described surviving two GM plant closings in the Chicago area before moving to Kokomo to work for Delphi. “They told us back then, if you did a good job, put your thirty years in, you’d retire with good benefits,” he said. “I felt I put my time in and did a good job. GM let us down, and now Delphi has let us down. Most of the problems GM and Delphi are having are a result of management problems, and yet they’re collecting their astronomical salaries, and we’re suffering. The money made here they used for investing in Mexico, India, China and everywhere else. It’s not right, trying to take away benefits and pensions from workers who worked all their lives, and leave you dry.”
LaBarge feels powerless–“like a little speck of dust in the corner”–but he’s willing to strike, not just for himself but for the rest of the country. “If Delphi gets away with this, it will open the floodgates for these other manufacturers to do the same things,” he said. “I see it coming, a depression in this country, when nobody can buy or do anything. You’ll see a lot of suicides, marriages breaking up. We had a guy who died of a heart attack at work. He’d been stressed out. Fifty-one years old. He was a pipefitter, too.”
Most workers acknowledge that Delphi is losing money, but they’re skeptical of the company’s explanations given ongoing investigations of its financial misstatements. And they note that Delphi is not insolvent now and that the bankruptcy filing aims to provide future relief (which wouldn’t be needed if GM’s market share picked up modestly). They blame Delphi’s woes partly on GM mismanagement: With nearly half its production going to GM, Delphi has suffered from GM’s flawed vehicle strategy.
But workers are even more livid about Delphi managers. As they see it, Delphi underfunded their pension plan (by about $11 billion) and used the earnings from their hard work to build a low-wage overseas manufacturing empire. Now the company is declaring bankruptcy only on its US operations, omitting its profitable overseas plants. “There’s no way they can be bankrupt,” argues Marquita Cherry, a technical trainer and union representative from the Kokomo plant. “If I had a home in Cancun, a bankruptcy court would go after that.”
Delphi workers know they make more than most other domestic auto parts workers, but when the company claimed publicly that labor costs averaged $76 an hour, it was sending them reports that their total compensation was much less, under $50 an hour. GM and Delphi do face legacy costs, but that’s a cost of past workers, for which management often did not plan adequately. Comparisons in the parts industry can also be misleading: Even current wages at the giant Kokomo integrated-circuit fabrication plant are in line with or slightly below the standard for such high-tech operations, argues Brian Stover, a maintenance electrician and part-time college business teacher. There’s little reason for wage cuts at the company’s profitable domestic plants.
On the other hand, at some low-tech Delphi plants, starting wages are already below Miller’s rejected opening proposal. And Miller has made clear that cutting wages will not protect roughly two-thirds of the jobs. In recent years the CWA has agreed to deep concessions at several Delphi plants. But negotiator Reichard observed, “We put competitive agreements in place to get jobs, and we lost two-thirds of our members. If they can’t keep jobs at $8 an hour, you have to question their ability to keep them at all.” Delphi workers report that even friends and family often view their wages as too high. “People say I should be ashamed of myself for wages and benefits I have,” said Larry Kerns, who attended the Kokomo rally. “I disagree. A lot of blue-collar folks and white-collar folks think this is the coming thing: You don’t deserve good wages and benefits. Why should I lower my standard of living? Why don’t we work together to raise your standards up?” But the UAW’s standards no longer lift up other workers as clearly as they once did.
The final insult came with Delphi’s executive compensation plan for the same people who led the company to bankruptcy. In the first six months it would have given the top executives incentive bonuses equal to the total compensation of Toyota’s top thirty-three executives, according to the New York Times, plus roughly $500 million in bonuses and equity after bankruptcy to 500 to 600 executives. Part of the plan has been deferred, but the bankruptcy court approved immediate retention incentives. “Why are CEOs allowed to get raises when they made horrendous business mistakes?” asks Cherry. “Our wages are always easiest to cut. Help me with that.”
Ed Overstreet may need help if he loses his job. “If I can’t get into GM,” says the 44-year-old tool-and-die maker from Kokomo, “it’s back to the old game I used to play when I got out of high school,” looking for whatever he can find. “It would put me in a big pinch,” he says. “I’ve got two kids in college, and my son’s school costs $16,000 a year. You base your lifestyle on what your wages are: The banks look at your pay and say you can afford a $150,000 house.” But he figures it might be hard to keep his house when other factories in the area pay so much less than Delphi or are cutting employment, even declaring bankruptcy.
And his woes could even hurt workers at a local shop like the Waffle House, where kitchen staff make $6 to $8 an hour. If Delphi slashes workers’ pay, “I think it will definitely keep some folks from coming in to eat,” says manager Paul McCune. “I hear a lot of customers talk about it–even asking if it would affect our business. It could be a domino effect.”
The looming threat was also the talk at Champs Bar in downtown Coopersville, where amid the glowing beer signs workers from the nearby high-tech fuel injector plant gathered one afternoon to discuss it. Toolmaker Tony Walkons was uncertain about his approaching retirement plans. “Now I have my doubts I can do it,” he said. “I don’t know what will happen. If they cut the pension, there goes my truck camper and travel in the US. My lifetime plan has been affected, right at the end of my career. What a way to end.”
“This is the end of the middle class,” said Kim Klapfenstein, 50, who says he’ll fight any concessions. “Let’s start right here in Coopersville.”
“We’re only a small part,” chimed in Chris Brown, who hails from a family of immigrant German farmers. “It’s been happening a long time. The working class is being crucified on a cross of corporate greed. This is only the latest battle.” Last year workers at his sister’s auto parts plant voted for deep concessions, but the work was shifted to Mexico anyway. And he worries that his kids, despite going to college, won’t be able to find any high-tech jobs.
“We can’t depend on the unions, the Democrats, the Republicans,” he grumbled. “We have to get ourselves mobilized, everyone in the plant and across plants–and it’s good they’re organizing service workers. They’re killing the American dream for all of us except that top 10 percent.”
Coopersville is the home plant of Gregg Shotwell, a modestly built man with an understated sense of humor, and potentially an influential figure in how the Delphi story plays out. Using his Internet newsletter, “Live Bait & Ammo,” Shotwell has been the key figure organizing more than a dozen meetings of Delphi workers interested in the kind of collective mobilization Brown described. Calling themselves Soldiers of Solidarity, this network of activists has been preparing–and practicing on a growing scale–a work-to-rule campaign to put pressure on Delphi by doing only what they’re told to do, effectively slowing work by not using their usual creativity. Often a critic of the UAW leadership, Shotwell now is ironically–but intentionally–giving the union more clout through the SOS mobilization. “They’re negotiating in the boardroom,” he says. “We are organizing horizontally and negotiating at the point of production.”
In the boardroom GM appears to be prepared to reduce its workforce, accept some returning Delphi workers and pick up much of Delphi’s retirement costs in order to prevent a strike, and to lower wages for remaining Delphi workers–a deal that may be acceptable to many workers but probably not to the SOS. It is equally possible that Delphi will push for too much, triggering widespread work-to-rule actions or a strike.
Less likely, union negotiators could turn to a novel strategy proposed by Ian Chan Hodges, founder of an inventors’ group called American Ingenuity Alliance, and work with allies to make a bid for Delphi’s many patents, which were radically undervalued in the bankruptcy. Then the new organization holding the patents would lease them back to Delphi with conditions about where the company would invest its funds.
The UAW still has great potential industrial power if it embraces the work-to-rule resistance that has already emerged in pockets, or if it decides to go on strike. Auto workers, accustomed to crisis, are nevertheless reluctant to pay for problems that management created, especially to enrich those managers. The response to SOS suggests a “sleeping militancy” among Delphi workers, argues Todd Jordan, a 28-year-old third-generation autoworker at the Kokomo plant whose blog has become a center for militants. “They’ll roll us all back seventy years,” he warns. “Does the rank and file want it to happen, or will we fight?”