May 11, 2008

Delphi: A Legacy In Limbo
by Ted Evanoff/The Indianapolis Star

As chairman’s book hits stores, the final chapter on the parts giant’s resurgence remains unwritten—the victim of ongoing turmoil in the nation’s auto industry

Steve Miller typed the final chapter in his optimistic book about troubled Delphi last year, predicting the auto parts giant soon would rise from the ashes.

Now his autobiography, “The Turnaround Kid: What I Learned Rescuing America’s Most Troubled Companies,” is reaching store shelves, recounting the 66-year-old finance specialist’s role as the problem-solver hired to lead from bankruptcy what was the country’s 56th-largest public corporation—and Indiana’s third-largest manufacturing employer.

Despite the book’s title, Delphi remains in Chapter 11 bankruptcy reorganization, stricken by falling auto sales at major customer General Motors while struggling to lure billions of essential dollars from banks and investors.

With Delphi down to its last $1.8 billion in cash, some industrial analysts doubt the Michigan-based supplier, which employs 4,600 in Indiana, almost entirely at Kokomo, can survive in its present form.

One option: Creditors could push Delphi, a company almost twice the size of Indiana drug powerhouse Eli Lilly and Co., to liquidate worldwide and sell its only money-making unit in the United States: the Kokomo-based electronics division.

Unlike the wire harness assemblies and other commodity items produced by other Delphi units, the Kokomo division’s products include premium items such as engine control modules for the Toyota Corolla, hybrid propulsion systems for the Ford Fusion and Milan, and crash-alert cruise control for the Volvo S80, V70 and XC70 that can automatically brake the car.

Just how the Troy, Mich.-based supplier could remain in flux even as Miller’s insider book hits the market traces to the unpredictable and long- running restructuring of General Motors.

Delphi has ailed ever since GM cut output in 2005 as market share eroded. Delphi brought in Miller the same year to run the company. He put Delphi in bankruptcy, thinking it would give the company leverage to gain concessions from GM and the United Auto Workers union.

Delphi eventually cut its U.S. work force by half, down to 14,800 workers, and closed dozens of plants, including operations in Anderson. By late last year, Miller figured on Delphi leaving bankruptcy this spring. He was ready to have “Turnaround Kid” appear at the same time.

Unexpectedly, the slow economy and spiking fuel prices hammered GM sales. As GM cut vehicle production, orders for parts dropped. Delphi lost $589 million in the first quarter on top of $3.1 billion lost last year on $22.3 billion in revenue.

Plans on hold

Wary of the supplier’s future ability to make money, hedge fund Appaloosa Partners scrubbed a deal to lead a $6.1 billion recapitalization of Delphi only hours before Miller was set to announce Delphi’s emergence from bankruptcy on April 4.

Unable to get hold of the vital cash, Delphi scuttled plans to soon depart Chapter 11, leaving Miller and his frank book in an awkward spot. He didn’t return calls asking for comment, though Walter Curchack, an attorney at the New York law firm Loeb & Loeb who handles complex bankruptcies, said publisher Collins Harper might have proceeded with the book over Miller’s protest.

Miller in print was critical of individuals he had been bargaining with to help bring the company out of bankruptcy. Of UAW President Ron Gettlefinger, he wrote: “Instead of calm leadership, we got vitriolic verbal attacks on management.’’ And he said of Appaloosa chief David Tepper, whose personal earnings were reported to total $800 million for 2006 and 2007: “David wanted us to sue General Motors, play hardball with the UAW, and simply walk away from health care and pension obligations.’’

Are those union bosses and hedge fund mavens now hindering Delphi’s recovery? It’s not clear—although Curchack says it’s possible. “In a Chapter 11 you have different constituencies, each with their own agenda,’’ said Curchack, who is not involved in the Delphi bankruptcy. “If something upsets someone, that can play out in the proceedings.’’

Nevertheless, Miller could have saved the entire Detroit auto industry from bankruptcy, suggests Fortune magazine’s veteran automotive reporter, Allan Sloan.

Reviewing the book on WashingtonPost.com, Sloan writes that by putting Delphi into bankruptcy, Miller “scared the hell out of GM, Ford, Chrysler and the United Auto Workers and forced a historic compromise over retiree health care. The firms agreed to set up huge trust funds that are smaller than their retiree obligations but far more than retirees would probably get in bankruptcy proceedings. Absent that deal, I think all three would ultimately have had to go into Chapter 11. Now at least there’s hope for them.’’

Sloan wrote that in February. Today, it still is not clear Delphi can soldier on. Analysts agree the key to survival for Delphi, whose stock price had sunk to 10 cents a share on Friday from nearly $19 a share at the initial public offering in May 1999, remains distant: Attract new investors.

“Delphi’s not making any money. There’s just no way to get around that,’’ said business analyst David Trainer, head of New Constructs in Franklin, Tenn., which analyzed Delphi’s prospects in a report for money managers.

Now some analysts say some creditors may be pressing Delphi to sell off pieces of the business, although no one outside the company is sure who might buy the Kokomo division, or even if it is for sale. Possible suitors are Germany’s Siemens, Japan’s Denso and literally dozens of investors.

“What may be happening is the new- money investors are more interested in the pieces of Delphi than the whole,’’ Curchack said.

Additional time

Delphi has some time to find new money. Late in April, U.S. Bankruptcy Court Judge Robert Drain, in New York, agreed Miller could rework Delphi’s reorganization plan into August. Drain also pushed back to Dec. 31 the July 1 deadline to repay operating loans. Known as debtor-in-possession loans, the $4.6 billion in financing is owed by Delphi to a group of lenders led by JPMorgan Chase.

On Friday, Delphi arranged to replace those loans with a new lending package worth $4.35 billion. In addition, GM has pledged new cash. “These actions provide the company with sufficient liquidity to support the ongoing implementation of Delphi’s transformation plan,’’ says a Delphi statement issued Friday.

It’s no mystery why Delphi and GM are closely tied. Delphi, which employs about 170,000 workers worldwide, was created by GM in a 1990s consolidation of auto- parts plants bought in the first decades of the 20th century by the automaker, which opened in Detroit in 1908.

Among the earliest acquisitions were electrical parts maker Remy Brothers of Anderson and Ohio’s Dayton Electric Co., or Delco. Both were merged decades ago to become Delco Remy, once the backbone of GM operations in Indiana.

By 1998, the automaker had put Delco Remy in Delphi and spun off the larger Delphi in an effort to buy less costly auto parts from other companies. The restructuring eventually stripped Indiana of about 25,000 GM and Delphi jobs.

While Kokomo was left as the lone Indiana city still dependent on either company, the Delco Remy legacy provided one significant advantage. Delco had opened a $1 billion computer chip fabricating plant in Kokomo in the 1980s.

Since then, Delco had focused much of its electronic engineering resources around the facility, one of the few semiconductor plants in the Midwest. Once it was independent of GM, Delphi kept its electronics division headquarters in Kokomo.

Today, 2,600 of Delphi’s Kokomo employees are engineers, administrators and other office workers. When the Kokomo mayor gave the 2008 state-of- the-city speech this winter, his focus was the engineers’ creativity rather than the uncertainty of Delphi’s bankruptcy.

“I’m very optimistic in their ability come out of this bankruptcy intact,’’ Kokomo Mayor David Goodnight said in a recent interview. “They’re very innovative. In the community, I think there’s mostly an anticipation that we’re going to get this bankruptcy behind us and move forward.’‘

May 11, 2008

American Axle Rift Remains Despite GM Contribution Offer
by The Wall Street Journal

The two sides in a union strike that has shut down a key supplier of General Motors Corp. signaled no softening of positions after an offer by GM last week to contribute $200 million toward settling the dispute – possibly in hopes of getting the auto maker to increase the offer.

Over the weekend, Ron Gettelfinger, president of the United Auto Workers, said GM’s move encouraged the supplier, American Axle & Manufacturing Inc., to take a harder line in the talks. In an interview with a Detroit radio station, Mr. Gettelfinger called GM’s offer a “mistake” and added that it dealt the negotiations a setback.

American Axle, which gets much of its business from GM, now wants to close a plant in Cheektowaga, N.Y., Mr. Gettelfinger said. That comes in addition to two other plant closures and other concessions the UAW already agreed to in past years.

“It’s going to make the talks increasingly difficult,” he said, referring to American Axle’s latest demand. “I was very, very leery when I saw that General Motors had put in $200 million.”

Despite Mr. Gettelfinger’s tough public reaction to GM’s offer, people close to both sides in the talks said the union and American Axle are hoping to force GM to play a major role in the talks. Brushing off GM’s initial offer could pressure the auto maker into proposing an even large sum.

About 3,600 American Axle workers have been on strike for about two-and-a-half months, crippling GM’s ability to build full-size pick up trucks and sports-utility vehicles. GM estimated the strike lowered its first quarter pre-tax profit in North America by $800 million.

American Axle wants the union to make similar wage and benefit concessions that it has already granted Dana Corp., another axle maker, and to accept closures of some U.S. plants. If it doesn’t get the concessions, American Axle could move more work to plants in Mexico.

According to people familiar with its thinking, American Axle believes the strike could be resolved either by the UAW relenting, or by GM stepping in to help fund a settlement.

The Axle strike puts GM in a tough spot. The company is also involved in the bail out Delphi Corp., another supplier in conflict with the UAW. GM has already committed about $8.3 billion to helping Delphi, which is in bankruptcy protection.

GM is also facing UAW strikes at two of its own plants that has halted production of some key models. A plant near Lansing, Mich., makes highly profitable “crossovers” and another in Fairfax, Kan., makes the highly touted Chevrolet Malibu sedan.

In a pair of regulatory filings made last week, American Axle and GM said the $200 million was for employee buyouts and early retirements. The offer was predicated upon an expedient resolution of the dispute.

May 11, 2008

The Prophet Of Pensions
by Roger Lowenstein/The Los Angeles Times

America failed to heed Walter Reuther’s ideas for a social safety net. But we may get a second chance.

Recently, i heard three European journalists express astonishment at the primitive state of America’s social safety net. “Do you have private pensions?” they asked. The system is unraveling, I explained. “Healthcare?” Some folks get it, some don’t. “Public pensions?” Vastly underfunded.

When I mentioned that Hillary Rodham Clinton and Barack Obama are touting innovative ideas for government savings plans, in the form of a national 401(k)—the journalists harrumphed. Holland and Switzerland have had such plans for years.

Why is the United States so far behind? The answer to this question goes back nearly a century, to the fiery Walter Reuther, the head of the United Auto Workers, and to a tragic missed opportunity by American business and government.

Reuther was the son of a German-born Social Democrat who passionately believed that the United States should adopt a system of social protections similar to those in Europe. The serious-minded, redheaded son swallowed his father’s passion whole.

In 1927, 20-year-old Reuther got a job at the Ford Motor Co. just as the automaker was taking the Model T off the line and laying off thousands of workers. Soon, the Depression set in, and thousands of autoworkers lost their jobs. As he watched what was happening, Reuther realized that factory workers needed a measure of job security, some kind of unemployment insurance and healthcare (he had suffered the loss of a toe in an industrial accident). He began to meet with conspiring unionists.

In 1932, he either quit Ford or was fired for being an agitator—the record is unclear. With opportunities for new work scant, he decided to set off, with his brother, Victor, on a fabulous world tour. They had in mind not museums and palaces but ordinary factories. The brothers hoped to sample working conditions of the world.

Their ship landed in Hamburg, Germany, in 1933, just as the Reichstag fire was sealing the Nazis’ control over the Reuthers’ ancestral homeland. Next, they traveled to Austria and Holland and eventually secured visas for the Soviet Union, where they obtained work in the giant Gorky auto factory. In Gorky, as Victor wrote home, they saw socialism “taken down from the books and shelves and put into actual application.” Then they boarded a train for the Far East, to China and Japan. After 32 months, the brothers returned, vowing to secure for Americans the best of what they had seen overseas. To Walter Reuther, this meant worker security.

By the end of World War II, Reuther had squeezed out communist rivals and become the head of the UAW. He wanted a full pension for his workers (Social Security even in those days offered a pretty meager retirement benefit) as well as a healthcare plan and a wage for the rank-and-file that would be guaranteed even when the economy was slack.

While Reuther bargained over these benefits with the employers in Detroit, his real aim was to secure them for workers in perpetuity from the federal government in Washington. Like other labor leaders of that era, he was imbued with a genuine feeling of class solidarity; he thought of himself as an advocate for all working people, not just those in the UAW. Therefore, he argued that pensions and healthcare were properly the responsibility of the state.

In the late 1940s, Reuther urged the automakers to go to Washington and “fight with us” for government benefits. This would take the companies off the hook, provide workers with more security and spread the goodies to all citizens.

Under pressure from Reuther and others, President Truman proposed government healthcare in 1947 and, for a brief moment, the U.S. seemed to be heading toward a version of the welfare state similar to those in European democracies. Harry Becker, a top UAW official, warned that either Congress would deliver social insurance or unions would demand it “across the collective-bargaining table.”

But big business, including the auto industry, which was led by reactionary General Motors Chief Executive Alfred Sloan, was hostile to the very idea of government benefits. Anything with a hint of collectivism in those dawning Cold War years was suspect.

Most of all, business resisted the demand for European-style universal benefits, which it equated with a dangerous, creeping statism. Business Week warned, in writing about the issue, that “British socialism seems a closer threat than Russian communism.”

As the Cold War got underway, the political moment for a universal scheme passed. Well-organized unions were left to bargain for their own pensions and healthcare (which the UAW got in spades) while less-powerful workers got skimpier benefits or nothing.

The United States thus developed a patchwork system of benefits that only two houses of Congress, 50 state legislatures and millions of individual companies could have “planned.” Today, Reuther’s dream of a national pension system is in shambles; fewer than one in five private-sector workers are covered.

And the industries that did provide pensions, such as autos, airlines and steel, were devastated by the burden. Steve Miller, the former chief executive of Delphi, the auto parts company that had been a part of GM and that Miller took into bankruptcy, told me that Reuther was right—Detroit should have fought with the union for public benefits, not against them.

It’s too late for that now. With the baby boom generation set to retire (this year, for the first time, boomers are drawing Social Security checks), half of all Americans have private retirement savings worth less than $31,000. Public pensions provided by state and local governments are lavish, but states have failed to properly fund them. The states are hundreds of billions of dollars in the hole on pensions and face a similar, as yet uncounted, liability on healthcare. This is why governors, including New Jersey’s Jon Corzine, are contemplating extreme measures, such as selling the fabled New Jersey Turnpike. The real estate slump is sure to make the local budgetary squeeze much worse.

The federal government is unlikely to offer a helping hand. Washington is already faced with the intractable burden of rising Social Security and Medicare costs as the population ages. If nothing is done, by 2040, the two programs will eat up roughly three-quarters of the federal budget.

Of the remaining presidential candidates, only Barack Obama has been so bold as to propose (tentatively) a tax increase to pay for Social Security benefits; no candidate has suggested how the U.S. might pay for burgeoning Medicare expenses, which are by far the bigger problem. Michael Leavitt, the secretary of Health and Human Services, said on April 29 that the program is “drifting toward disaster.”

But once the Democrats pick a candidate, these issues could emerge as a sleeper. John McCain has refused to rule out cutting Social Security benefits; that could make for a ripe debating moment. The Democrats say they will protect the program but don’t fully account for how they would do so.

With the safety net fraying, Americans are deeply worried. For 60 years, politicians have either deferred the dream of security or promised benefits without funding them. Management guru Peter Drucker predicted in 1950 that unfunded pensions would turn out to be a “mirage.” Workers at many failed companies later learned this the hard way. As Reuther knew, the government would have been a better guarantor.

The baby boomers have had a way of grabbing the country’s attention to each of their life passages. Just as a spotlight shone on draft-card burnings in the late ‘60s and early ‘70s and soccer moms in the ‘90s, so the difficulties of retirement will become the problem du jour. Then, perhaps, America will confront the inseparable issues of just benefits and sound funding. This time, the opportunity should not be missed.

Roger Lowenstein is a contributing writer to the New York Times Magazine. His new book, “While America Aged,” was published this month.

May 11, 2008

American Axle Seeks To Exit Area
by The Buffalo News

Two remaining sites would shut down.

American Axle & Manufacturing wants to close its Cheektowaga machine shop as well as its Tonawanda forge, exiting the Buffalo area completely, it was revealed Saturday.

United Auto Workers President Ron Gettelfinger said he believed the union was close to a contract deal to end the 10-week-old strike against American Axle until the auto parts supplier added the Cheektowaga plant to the two others it had previously indicated it wanted to close, forges in Tonawanda and Detroit.

Gettelfinger told WWJ-AM in Detroit that the latest proposal from the company — with the loss of the Cheektowaga plant — came Friday.

“I think it definitely made it worse, because now we’re facing another closure,” Gettelfinger said.

He said the union planned to remain at the bargaining table through the weekend, but said: “I don’t know where we’re at because the company changes their position every time we turn around.”

American Axle spokeswoman Renee Rogers said she couldn’t comment on specifics of a proposal. She said talks continued Saturday and the company continues to seek a U. S. market-competitive labor agreement.

“We have consistently offered proposals significantly higher than the agreement that our competitors have, because we want to end this,” she said. “And they have been consistently turned down by the UAW.”

Of the 580 Buffalo-area workers on strike at American Axle, about 100 work at the Cheektowaga site on Walden Avenue.

American Axle idled its Buffalo plant, on East Delavan Avenue, late last year.

A decade ago, the three Buffalo- area plants employed 2,400 people.

About 3,600 UAW members went on strike Feb. 26 at five plants — in the Buffalo area and in Michigan — over wage and benefit cuts the company is seeking.

There had been hope for a settlement after General Motors Corp.’s surprise announcement Thursday that it will throw in $200 million to help end the 10-week walkout, which has crippled production of GM pickup trucks and sport utility vehicles.

Detroit-based American Axle gets 80 percent of its business from GM, its former parent. It makes axles, drive shafts and stabilizer bars for pickup trucks like the Chevrolet Silverado, GM’s top-selling vehicle.

Many of its U. S. competitors won deals from the UAW to pay newly hired workers about $14 per hour. But American Axle workers say they won’t take that big a pay cut from a company that made $37 million last year.

May 11, 2008

UAW OKs Local Labor Agreement
by Jere Downs/The Courier-Journal

Vote helps Ford plant’s bid for a new product.

United Auto Workers at Ford Motor Co.’s Louisville Assembly Plant voted overwhelmingly Friday to ratify a local labor agreement.

Union leaders said the 73 percent yes vote by production workers at the struggling plant helps its prospects of getting a new product to replace the increasingly unpopular Ford Explorer.

Ford management “told me that if we get our contract resolved, they would come down shortly and announce the new product,” Jeff Donohue, the plant’s acting union building chairman, said yesterday. “The message is that workers here are doing everything that they can to ensure their jobs stay here.”

Ford spokeswoman Angie Kozleski could not be reached for comment yesterday. Company officials have steadfastly declined to name a timeline for the launch of a new vehicle.

Ford promised to build a new vehicle at the plant by 2011 as part of the national UAW contract ratified last fall.

The local agreement approved Friday is an addendum to that master pact, governing work rules, seniority, vacations and other nuts and bolts of operations at the Fern Valley Road plant.

In a first, the agreement requires plant management to distribute bottled Gatorade or the like when temperatures outside exceed 95 degrees. The plant is not air-conditioned.

Other highlights of the agreement include $150,000 in improvements such as air conditioning for four restrooms, and renovations to break and locker rooms. The pact also stipulates rules for distribution of overtime, bidding on preferred jobs, and worker training.

As gas prices rise and vehicle sales continue to disappoint, Ford has made some moves recently.

Of the 2,200 UAW workers at the Louisville Assembly Plant, 570 will be furloughed indefinitely in July as Ford eliminates the night shift, Donohue said yesterday. Last week, Kozleski confirmed the number to be laid off was “roughly 500.”

And last week, the automaker announced plans for rolling weekly layoffs of certain shifts at the Kentucky Truck Plant, in addition to closing that plant for all of July.

That is because orders for F-Series Super Duty trucks, produced at the Chamberlain Lane plant, have fallen by more than half in the last six months, UAW Local 862 President Rocky Comito said yesterday.

Six months ago, Ford had orders for between 70,000 to 80,000 new Super Duty trucks, Comito said. More recently, that figure fell to 30,000, he added.

Workers at the Kentucky Truck Plant recently rejected a tentative local labor agreement for their factory. Talks with management have begun on a second version, Comito said.

May 11, 2008

Productivity Called Key To Delphi Plant’s Future Viability
Matt Glynn/The Buffalo News

What it’ll take to keep it open.

“If this plant is going to survive long term, it needs to create the ability to be productive in its use of labor.” Robert “Steve” Miller Jr., Delphi Corp. chairman More Photos

Delphi Corp.’s executive chairman says the company’s Town of Lockport manufacturing plant needs to keep stressing efficiency in order to maintain its viability.

“If this plant is going to survive long term, it needs to create the ability to be productive in its use of labor,” said Robert “Steve” Miller Jr., who was the company’s chief executive officer until he gave up that role at the end of 2006.

Miller, 66, wrote the recently released book, “The Turnaround Kid: What I Learned Rescuing America’s Most Troubled Companies.” He recounts his experiences as an “itinerant corporate fix-it man” at distressed companies including Bethlehem Steel and his present assignment, Michigan-based Delphi.

Delphi has undergone a wrenching overhaul during Miller’s time there, filing for Chapter 11 bankruptcy, identifying plants to be sold or closed, and negotiating a labor deal that included wage cuts.

The company selected the Lockport site, which now employs about 2,600 hourly and salaried people, as just one of four U. S. operations it would keep.

Miller in an interview said two big factors contributed to that decision: the type of products the Lockport site makes, and the logistics involved in shipping what it produces.

The Lockport site focuses on thermal products such as climate-control systems, something Delphi decided was a good market for a restructured version of the company to stay in, he said.

“That’s a business we decided was a core competency that we could build on, on a global scale,” Miller said. In contrast, Delphi opted to exit some other product lines, like brakes.

The nature of the products the Lockport site makes — “big and bulky” — also influenced Delphi’s decision. It makes sense to manufacture those sorts of products somewhere near the automotive assembly plants that will use them, he said. Shipping those from overseas, compared to something small like sparkplugs, would prove too costly, he said.

Miller said the Lockport plant still faces challenges. Its labor costs, though lower than they were before, are still high by competitors’ standards, he said.

Still to be worked out at the local level is a “competitive operating agreement,” a follow-on to the labor contract approved companywide by UAW members last year. (Workers at the Lockport plant voted down the national contract, but the terms of it still apply to them.)

Miller said such a local agreement, covering areas like work rules and job classifications, is important because it gives the plant the flexibility it needs to be as efficient as possible, making best use of workers.

Delphi has been affected indirectly by the strike at American Axle & Manufacturing, through supplying General Motors. GM has been forced to stop or trim production at about two dozen plants due to the American Axle walkout, spawning temporary layoffs at the Lockport plant.

Delphi, through a deal approved by UAW members, has implemented sharply lower wage rates than American Axle, which is seeking similar reductions from its own hourly workers, and uses Delphi as an example of why it must go that route.

Miller said he feels empathy for the workers who endure those pay cuts.

“We’re going through very painful economic adjustments in this country,” he said. “It’s very tough on the families that have gotten used to the way things were.”

But Miller said companies like Delphi also have to bring their labor rates in line with their rivals’ rates, in order to survive and compete.

The issue of the wide disparity between executive and hourly worker pay flared up during the Delphi labor talks. UAW officials and members lashed out at the lucrative pay packages awarded to executives at a time when the workers were being asked to take cuts.

Miller acknowledged that was a sensitive topic. But he offered reasons for the differences.

“In any business, you have to be competitive across the various segments of your work force,” he said.

With hourly workers, “you need to have costs that are reasonably aligned with what your competitors have.”

“On the other hand, you also cannot survive as a business unless you have a management group to manage the business,” he said.

Those managers, Miller said, are not tied to one business, and companies like Delphi need to compete for their services with pay packages.

Miller, according to published reports, was in line to receive a cash bonus of $8.3 million when the company emerged from bankruptcy. But a judge directed Delphi to slash its executive cash bonuses linked to emerging from bankruptcy to a total of $16.5 million from a projected $87 million, so it is not clear how much Miller will receive.

Automakers like Ford and GM are undergoing major restructurings, but Miller said he remains “highly optimistic” about the future of auto manufacturing in the United States.

“I think a huge segment of the auto industry will always be located [in the United States],” he said.

Making vehicles overseas and shipping them to the United States is not only costly but comes with risks like possibly exposing cars to damage and harmful weather conditions, and ensuring the supply matches changing consumer tastes, he added.

He notes that foreign-based manufacturers have continued to open U. S. plants. “They see the economic need to construct the vehicles close to the ultimate consumer,” he said.

Manufacturing of components for those cars, he said, is different, and is subject to the forces of globalization. “If it’s easy to ship and where the shipping costs don’t eat up the labor cost differential, then many of these things are going to be made overseas,” he said.

Miller in his book had some tough words for Ron Gettelfinger, the UAW’s president, over Gettelfinger’s actions during the labor talks at Delphi. Miller said he stands by those comments, saying he tried to approach things in the book “openly and honestly.”

“The things I said I thought were tough but balanced,” he said. “I would only wish that Gettelfinger at some point would come around to say balanced things about the management at Delphi. He’s been quite critical in his statements.”

Miller said he has not yet decided what he will do after his work at Delphi is done. He said he intends to leave Delphi as soon as it emerges from bankruptcy, a process he estimates will take “months, not weeks” to complete.

May 10, 2008

American Axle Strike In 11th Week
by Workers World Magazine

The strikers at American Axle Manufacturing and Holdings (AAM) are still standing firm and are fighting against any concessions as they enter their 11th week on strike. And support continues to roll in from labor-community-student organizations.

The Michigan Committee Against War and Injustice (MECAWI) was out on their solidarity day on May 4. MECAWI has chosen Sunday afternoons for its members to come as a group to support the strikers. Individual members stop by the picket line daily. Other community organizations, such as Michigan Welfare Rights, are engaging in similar group action on Tuesdays.

Kim Greene of MECAWI, who has participated on the picket line at various times, told Workers World, “Our group is about supporting what we consider any injustice in the world and we consider what’s happening to the strikers unjust, so we’re out here to support them in any way we can.”

UNITE HERE brought a delegation to the AAM picket line in Detroit on May 5. This labor solidarity happens daily as UAW members and other union members throughout the Midwest and beyond stop by the picket lines and drop off provisions at the union hall to support their sisters and brothers at AAM.

The UAW has also been on strike for three weeks at the Lansing, Mich., Delta Township crossover assembly plant, which produces Buick Enclave, GMC Acadia and Saturn Outlook, and has just begun a strike at the plant in Kansas that produces the Malibu line.

May 10, 2008

Unprecedented Opposition To CAW’s Concession-Filled Deal With Ford Canada
by Carl Bronski/The World Socialist Website

Only 67 percent of workers organized in the Canadian Auto Workers (CAW) union and employed by Ford Canada have voted to accept a concessions contract secretly negotiated by the union leadership.

This is the lowest percentage for a contract ratification with one of the Big Three US-based automakers in the union’s history. Moreover, at Ford’s flagship Oakville assembly plant just west of Toronto, members of CAW Local 707 rejected the deal by a margin of 56 percent. The rejection in Oakville was also an historic milestone. Never before has a CAW local voted against a master contract that the union’s leadership negotiated with one of the Big Three.

Reports from the Oakville ratification meeting described the atmosphere as “raucous.” Afterward, union leaders could barely restrain their contempt for the democratic will of the membership.

Local 707 president Gary Beck remarked that workers “didn’t see outside of what’s going on at our plant.” Beck’s remarks are a crude attempt to insinuate the Local 707 members are “selfish” because they rebuffed the union bureaucracy’s argument that massive concessions are needed to ensure Ford is “competitive” and thereby “protect jobs.”

In reality, the unprecedented concessions to Ford, which effectively entailed opening up the existing agreement and include unprecedented wage and benefit cuts, are aimed at ensuring the interests of Ford’s shareholders and the CAW bureaucracy at the expense of Ford workers and indeed the working class as whole—since the Ford agreement will be seized on by both big business and the unions to press for further concession from workers in basic industry.

CAW President Buzz Hargrove joined Beck in dismissing the “No” vote of the Local 707 membership. According to Hargrove, “it was just one of those situations where a handful of people got control of the mikes early and shifted the mood.” That next to no one from outside the union officialdom spoke in favour of the agreement spiked Hargrove’s ire. “Mistruths and distortions” were spread, he maintained.

In fact, Hargrove and the CAW leadership virtually press-ganged the membership into endorsing the tentative contract.

After weeks of secret negotiations, Hargrove stunned both the industry and his own members with the announcement that a deal had been negotiated with Ford fully five months before the contract deadline. Traditionally, the month of July heralds the opening of a bargaining season that normally stretches into September. Yet, with the contract not set to expire until September 15 and before the union had even held its traditional collective bargaining convention (where the members’ contract priorities are ostensibly decided), Hargrove announced that an unprecedented early contract settlement had been reached with Ford.

The CAW leadership first revealed that agreement had been reached with Ford on a Master Economic Offer on Monday, April 28. Details of the various plant-wide agreements were negotiated over the next three or four days, with Ford workers compelled to vote on the total package on the May 3-4 weekend.

In the end, autoworkers in Windsor, St. Thomas, and Brampton—all in areas of high unemployment and with facilities under continued threat of downsizing or closure—tipped the balance in favour of the deal. A clause in the contract promising an extra year of life to the assembly plant in St. Thomas (which had already lost 1,200 jobs with the elimination of the second shift) resulted in a particularly high vote for the deal in that south-west Ontario town. Windsor workers, who also supported the agreement, nonetheless expressed dissatisfaction to Windsor Star reporters as they left the ratification meeting. “I think it’s a sellout to our retirees” said Steph Brown. “For me”, said veteran worker Pete Despenic, “I can live with it. If I were a younger man, I don’t know. I’d probably have a different view”.

Corporatism and protectionism

In welcoming the ratification of the concessions deal, Mike Vince, the head of the Windsor Ford local (Local 200) and the chair of the CAW Ford Master Bargaining Committee, gave voice to the corporatist and nationalist perspective of the CAW bureaucracy. In so doing, he made clear that the CAW intends to even more crassly pit Ford Canada workers against their class brothers and sisters in the US in a fratricidal struggle to determine who can produce the biggest profits for the auto bosses.

Said Vince, “Putting this agreement together five months early and then ratifying sends an extremely powerful message to the federal government and to the province, but most importantly to the Ford Motor Company that we understand that times have changed. ... We’re willing to look at things outside the box. By doing that, it puts us in much better stead for future investment over and above what we’re doing at [the] Essex Engine [plant].”

And to underline the point that the union is in a job-bidding war, Vince added, “We’re going to put ourselves in a good position in Ford Motor Company’s mind.”

Hargrove, as would be expected, has proclaimed the agreement with Ford “a victory” and has claimed that the unprecedented wage and benefit cuts are not concessions, but merely “offsets.” However, in an unguarded moment, the CAW president told reporters, “I’m relieved more than anything.”

In their post-ratification comments, both Hargrove and Vince indicated that the CAW leadership intends to divert the apprehension and anger of auto workers over the fate of the their jobs and wages into a reactionary campaign for even closer tripartite cooperation between the union, the government and the Big Three and for protectionist measures aimed at boosting the Big Three against the European- and Asian-owned competitors. The CAW is already a full partner of the tripartite Canadian Automotive Partnership Council.

“We’ve done our job by negotiating a responsible and pragmatic agreement,” declared Hargrove. “We will continue to keep the heat on the federal government to address the problems that are eroding the auto industry today.”

For their part, Ford executives have expressed elation with the new contract, noting that with the concessions surrendered by the union, Ford has secured long-term savings and in return for almost no new spending.

Unprecedented contract concessions

The agreement freezes Ford workers’ wages for the life of the three-year deal, cuts 40 hours of vacation pay per year, tightens caps for long-term medical care, increases employee co-pays on prescription drugs, reduces pension entitlements, and freezes cost-of-living (COLA) adjustments for the remainder of the current contract and the first year of the new deal.

The contract also sets the stage for further layoffs with “improved restructuring benefits” clauses and ominously promises a “commitment to explore and establish a pre-funded, off-balance-sheet Retiree Health Benefit Fund.” This is a euphemism for shifting responsibility for managing (and reducing) pension benefits from the company to the union. In return for permanently surrendering gains won in decades of struggle, workers will receive two one-time “bonus” payments totaling Can. $5,700.

The deal with Ford in many ways resembles the contracts struck by the United Auto Workers (UAW) union with the Big Three in Detroit last autumn. In that round of negotiations, the UAW completely capitulated to the demands of the automakers. It accepted a draconian two-tier wage system and massive benefit cuts and, in a watershed initiative, agreed that responsibility for managing and cutting “legacy cost” benefit programs should be shifted from the company to the union. In so doing, the UAW will quickly become one of the largest healthcare insurance providers in America, with a vested interest in squeezing its own membership.

In touting the concessions deal with Ford, Hargrove has made much of the fact that the two-tier wage structure it includes doesn’t prevent new hires from ever attaining the wage and benefit levels of existing workers. This is a rather threadbare effort to disguise the fact that under the preposterously-named “New Hire Grow-In System” that the union has embraced, new hires will for years constitute a low-paid workforce. New Forc Canada employees will start at only 70 percent of base wages and benefits and only reach 100 percent after three years.

Workers should have no doubt that these provisions will be used in future contract negotiations as a lever to press for further reductions in wages both for veteran and newly hired workers. In the highly profitable Oakville plant, Ford will almost immediately bring in 500 new workers at the reduced rate.

Hargrove has justified his going behind the back of the membership to strike a deal with Ford by pointing to the deteriorating economic situation. But there is no question that the growing militancy of autoworkers, especially in the US, was also a key factor—and this in two respects. Hargrove wanted to demonstrate to the auto bosses that the CAW can deliver “labor peace” and even more importantly to prevent auto workers in Canada from joining forces with US workers in a common struggle against the destruction of jobs, wages and working conditions.

Last fall autoworkers employed by GM, Ford and Chrysler in the United States fought against further concessions, forcing the UAW leadership to deploy its representatives in the rebellious plants, sometimes misrepresenting investment plans for the particular facilities, and other times resorting to more forceful methods of persuasion. In the event, significant pockets of resistance forced the UAW to call its infamous half-day “Hollywood Strikes” in order to blow off the gathering steam. Contracts eventually were ratified, but with extremely tenuous margins.

Yet the rebellion amongst autoworkers in the United States has not abated. UAW members at American Axle plants in Michigan and New York are currently engaged in a bitter, 11-week battle against both the company and their own union, who are preparing to slash wages by $11 to $14 per hour and close several plants.

The popularity of the CAW’s Ford Canada deal amongst auto executives is exemplified by the fact that both GM and Chrysler have now consented to sit down with the CAW in an attempt to work out agreements, well in advance of the September contract-expiry deadlines for those companies.

The CAW began negotiations with GM on Thursday. Stew Low, a spokesman for the corporation, made it clear that his company will be looking for at least the same savings that Ford has won, but because of operational differences between Ford and GM, “variances”—i.e. even greater concessions—will have to be considered. “Not everything in Ford’s agreement would necessarily fit into ours,” said Low.

Hargrove, meanwhile, has expressed confidence that the huge concessions granted to Ford will be adopted by their two competitors. “In my view, it would be hard for GM and Chrysler to say it’s a great deal for Ford but harms them.”

The concessions pact imposed on the Ford Canada workers underscores the urgency of auto workers adopting an entirely new strategy in opposition to the CAW—a strategy based on a refusal to accept the subordination of economic life and social needs to the profit imperative of big business, and on the essential common class interests of auto workers in North America and around the world.

May 10, 2008

Choice Hits Chrysler’s Laid-Off Workers
by Eric Morath/The Detroit News

Sterling Hts. employees among first under UAW pact told to take out-of-state offers or risk losing jobs.

Hundreds of laid-off Chrysler LLC workers in Sterling Heights are facing the reality of the landmark UAW contract they agreed to last fall as they find themselves choosing between out-of-state posts and the possibility of permanently losing their jobs.

This week and last week, they received letters giving them just a few days to accept or decline a job at plants in Wisconsin or Illinois.

The workers at Chrysler’s Sterling Heights Assembly Plant are among the first of several thousand across the country who likely will tackle the same difficult decision as Detroit’s Big Three automakers attempt to empty their jobs banks and return laid-off workers to productive positions.

A stipulation in the agreements the Big Three reached with the United Auto Workers last fall allows the automakers to offer idled workers positions anywhere in the United States, rather than just within their region, as was true in the past.

If workers reject a certain number of offers—four at Chrysler and General Motors Corp., two at Ford Motor Co.—they can lose their jobs.

As the automakers trim their work forces through early retirements and buyouts in a bid to match production with declining demand for their vehicles, they are finding that some plants have hundreds of workers in the jobs bank, which means they are paid not to work, while other factories have open positions.

By asking workers to move or lose their jobs, automakers can clear the banks, an expensive employment protection program they set up in the 1980s to win UAW support for controversial efforts to make factories more productive. Workers in the jobs bank receive full pay. Reassigning workers makes good financial sense for the Big Three, which are fighting to return to profitability amid a shrinking domestic market.

“A jobs bank employee is the most expensive employee that you can have,” said Fred Hubacker, a former Chrysler executive who is executive director of turnaround firm Conway, MacKenzie & Dunleavy in Birmingham.

In addition, once laid-off workers are placed elsewhere, the companies can fill remaining openings with new workers paid lower, second-tier wages. Those hires would receive about half the wages of current employees.

“They need to get people out of the jobs bank as quickly as they can … (and) then have a huge emphasis of hiring tier-two workers,” he said.

Four days to decide

Chrysler sent separate letters to Sterling Heights workers, offering them jobs in Belvidere, Ill., or Kenosha, Wis.

A letter addressed to jobs bank employees, obtained by The Detroit News, stated: “If an employee on Protected Status declines two such offers, he/she will be placed on layoff. Employees on layoff, who decline two additional offers will be placed on Formal Leave of Absence and will retain recall rights but will receive no pay or benefits.”

Karie Davis was among the workers who received a letter. She was given four days to make a choice.

Davis took a transfer to the Belvidere Assembly Plant because she doesn’t want to risk losing her Chrysler job, and the plant, about 65 miles west of Chicago, is closer to her Novi home and fiance than other outposts in the company’s manufacturing operations.

“I don’t want to go, but it seems that my chances of having a job there is better than having one here,” the eight-year Chrysler veteran said, noting that the Belvidere plant makes more products and runs one more shift than Sterling Assembly.

Davis said she hopes her time in Illinois will be short—if Chrysler offers her another buyout package, as the company did earlier this year, she’ll take it.

The reassignment offers have so far been limited to Sterling Heights, Chrysler spokesman Ed Saenz said. He said the offers could extend to others elsewhere.

Chrysler Vice Chairman and President Tom LaSorda said this month that the automaker is relocating some workers around the country as those accepting buyouts and retirement plans depart.

Ford and GM are likely make similar transfer offers to their laid-off employees, but neither has done so yet.

Another round of buyout and retirement offers at GM closes May 22. After that it’s expected that openings will be created, and some workers could receive reassignment offers, GM spokesman Dan Flores said. “Any employee movement will be handled in accordance with the UAW and GM national contract,” he said.

Moving difficult

During a meeting this week at UAW Local 1700, which represents Sterling Assembly workers, union officials told workers they understood that moving would be very difficult, but encouraged them to consider the offers because it would keep jobs in the hands of higher-paid tier-one workers.

The offers could affect employees differently, as not all laid-off workers are in the jobs bank. Workers are typically placed first on layoff, for as many as 48 weeks, and then flow into the jobs bank. On layoff, workers receive 95 percent of their take-home pay.

Officials at the meeting said if a worker who is laid off but not in the jobs bank rejects a relocation offer, it would not count as one of the four declines. Chrysler’s Saenz would not comment on how a rejection would affect a laid-off worker outside the jobs bank.

Several Sterling Assembly workers said they could not uproot their families to take a job in another state. They said it would be difficult to sell their homes in Michigan’s housing market but also conceded that finding a job in Metro Detroit would not be easy.

“For all the people who couldn’t take the buyout, this is a way to force them out,” said Joe Kavanagh, a plant worker from Monroe.

Having less than a week to choose, he said he couldn’t make the decision to pull his children out of school and move out of state. Per the contract, Chrysler offers up to $30,000 in relocation costs, if a worker gives up his or her seniority.

Kavanagh will wait and hope a position opens at a nearby factory. “If I went somewhere else, I’d be the lowest on the roll and first one out the door,” he said. “It’s too risky.”

May 10, 2008

UAW: American Axle Proposal Includes Closing Three Plants
by Eric Morath/The Detroit News

Negotiations to end the nearly 11 week-long American Axle strike have broken down, as the company is now proposing to close a third plant, United Auto Workers President Ron Gettlefinger said Saturday.

Gettlefinger, in an interview with WWJ radio, called the proposal to close a Cheektowaga, N.Y., plant an “insult” and said it came out of left field.

“If the company continues down this road, it’s going to make the talks increasingly more difficult,” he said.

“I don’t know how they can call themselves American Axle anymore. To me it’s more like Axle Mexico.”

Gettlefinger confirmed the union and American Axle & Manufacturing Holdings Inc. had previously agreed to close forges in Detroit and Tonawanda, N.Y.

About 3,600 American Axle workers have been on strike at five plants since Feb. 26, after they refused to accept deep cuts in wages and benefits.

The latest breakdown came late Friday, a day after General Motors Corp agreed to pay up to $200 million to help end the strike by funding employee buyouts, early retirements and wage buydowns.

Gettlefinger, who said previously he didn’t want GM involved, now says the automaker’s assistance “definitely made it worse.”

“I feared that as greedy as this group is, that when General Motors put more money in there, instead of trying to use it to resolve the negotiations, they’d try to figure a way to keep it for themselves,” he said.

American Axle spokeswoman Renee Rogers said she wouldn’t specifically address Gettlefinger’s comments or any plans to close plants.

“We have a proposal that has been considerably higher than the market cost competitive agreement that the UAW gave to our competitors, including Dana (Corp.),” she said. “We continue to work toward obtaining a settlement quickly.”

Late last month, the company proposed a deal that called for workers to accept wage cuts ranging from $5 to $14 per hour, depending on position, and the shutdown of the forge plants, in exchange for $140,000 buyouts or a $90,000 buydown bonus to stay at a lower wage.

Those close to the negotiations have said the amount of those buyouts and buydowns did not increase significantly after GM offered to assist this week.

In the WWJ interview, Gettlefinger said he recognizes that the talks have been tumultuous for strikers. He said even his top negotiators were so sure the strike was close to a conclusion nearly a month ago that they canceled a major rally in Detroit’s Hart Plaza.

“This negotiation is very challenging,” he said. “It’s been like a roller coaster ride for our members on the picket line.”

Detroit-based American Axle, with sales of more than $3 billion last year, gets 80 percent of its business from GM, its former parent. It makes axles, drive shafts and stabilizer bars for pickup trucks like the Chevrolet Silverado, GM’s top-selling vehicle.

Many of its U.S. competitors won deals from the UAW to pay newly hired workers about $14 per hour. But American Axle workers say they won’t take that big of a pay cut from a company that made $37 million last year.