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.