2005-10-13 00:14:12 UTC
"Let them move to Texas."
Delphi reflects bankruptcy of industrial welfare state
by Thomas Bray
Around Detroit, the bankruptcy of giant auto parts maker Delphi Corp.
is seen as a precursor of what's in store for the entire American auto
industry. More fundamentally, it confirms the bankruptcy of the
industrial welfare state.
The powers of denial ensure it may be some time before our politicians,
unions and even corporate leaders catch up to that fact. Exhibit A was
the knee-jerk rant by Gov. Jennifer Granholm, who pronounced herself
"angry" at Delphi. She then went on to blame the usual catalog of
left-wing villains: "globalization," "outsourcing," "upper management,"
"lack of support from Washington for the industries that made our
country great" and "so-called free trade."
Oh yes, and not enough government spending on health care.
But no amount of foot-stamping is likely to change facts. Among them:
Delphi's 33,000 unionized workers in the United States, like those of
General Motors, Ford and Chrysler, still earn far above the national
average in wages and benefits long after it was clear that this was no
Yes, management must share some of the blame. And yes, America's image
of itself, indeed its fabric of life, is so tightly bound to the
automobile that the industry's coming reorganization is likely to be
even more painful than the traumas already suffered by such "legacy"
industries as steel and airlines.
Henry Ford's famous $5-a-day pay brought cars within reach of his
workers. Delphi's proposal for a $10-an-hour wage -- an $80 day --
suggests the end of the American dream for auto workers.
But it's only the end of the dream if you think there isn't anything
better out there, including a thoroughly modernized American auto
industry. That's one reason a savvy investor like Kirk Kerkorian bought
into GM recently. He is betting a way will be found to unlock the value
that still exists in Detroit.
Besides, Detroit long lived in a bit of a dream world. In the 1950s and
1960s, when the rest of the industrial world was still emerging from
the rubble of World War II, Detroit could sell practically every car it
turned out -- and congratulate itself for passing along premium wage
and benefit costs to the buyer.
Pretty soon, though, competitive shadows began to appear -- first the
Volkswagen Beetle, then the Datsun and so on.
Detroit laughed at the upstarts, but now GM's market share has shrunk
to 26 percent of the U.S. market from well over 50 percent. The ranks
of the United Auto Workers have plunged from 1.5 million in the late
1970s to 654,000 last year. Staggering losses have replaced profits,
even amid a robust national economic recovery.
National health care isn't an answer. If it were, Europe would be No.
1. But so costly have Europe's welfare states become that unemployment
is far higher than in the United States.
Nor is pulling up the drawbridge against foreign autos an option, as
Granholm seems to imply. The foreign "transplants" are already well
established (with nonunionized American workers), and American auto
companies are heavily invested abroad (most of Delphi's total work
force of 185,000 is in other countries). A fit of protectionism would
crater the economy on which Detroit depends.
Globalization isn't the enemy. It's simply the messenger, exposing the
rotten structure of the industrial welfare state for what it is, a
lumbering dinosaur that can't see 20 feet ahead of itself. Like the
broader welfare state, to which it is so closely tied through labor,
tax and other laws, the industrial welfare state of the 20th century is
badly overdue for a rethinking.
"If GM comes out of 2007 with a labor agreement that looks like what
today's agreement is, they are inevitably headed toward Chapter 11,"
Three days after filing the biggest manufacturing bankruptcy in U.S.
history, Miller outlined what he described as a pivotal point for U.S.
industrial society. Delphi's dilemma is "simply a flash point and a
test case" for this crisis, said Miller, who has steered auto
companies, steelmakers and airlines through bankruptcies over the past
The very existence of GM, Ford Motor Co. and many Detroit-area auto
suppliers is threatened by the steady increase in wages, health care
costs and pensions that the United Auto Workers union has won for its
members since 1947, he said. Retirement costs were manageable when
workers retired at age 65 and died five years later; they're
debilitating to companies when workers retire at 50 and live 40 more
years, Miller said.