Who Lost Delphi - Road to the Middle Class

ON OCTOBER 8, 2005, Delphi, the auto parts supplier, became the largest US manufacturer to file Chapter 11 bankruptcy proceedings. Delphi is the parts division that General Motors spun off a few years ago.

The bankruptcy of Delphi will have serious consequences even if it survives. It will no doubt eliminate shareholders’ equity. It will severely cut workers’ wages and benefits. It will likely throw the company’s pension plan into the hands of the federal pension insurance system, resulting in major cuts in retiree pensions.

And, of course, there is the potential for a disruption in parts supplies to U.S. automakers.

Delphi is under criticism for awarding bonuses to its top executives before announcing bankruptcy. But CEO Steve Miller defends his actions saying

it was the only way to keep talented management needed to complete the restructuring.
"We pay hourly workers three times the market rate; salaried staff are paid a market rate and execs are paid below market," said Mr Miller.

So who lost Delphi? Was it greedy management asleep at the switch? Was it greedy unions that negotiated unsustainable wages and benefits by using their muscle power to intimidate the auto manufacturers? Is it the fault of foreign automakers competing with slave or sweated labor? Is it the fault of Congress that has given the labor unions monopoly powers that would never have been given to a corporation? Is it the fault of labor activists that have polished the image of labor unions over the years? Is it the fault of workers who insisted that their union leaders negotiate for wages and benefits that could never be sustained over the long term?

Or is it just the way of the world? Corporations are born, they grow and prosper, spinning out products to consumers and income to stakeholders. And then they grow old and die.

So which is it?

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Christopher Chantrill blogs at www.roadtothemiddleclass.com. His Road to the Middle Class is forthcoming.

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