General Motors Death Watch 70: Locked and Loaded
Before you can buy a firearm in Rhode Island, you have to finish a gun safety course. My instruction consisted of a pot-bellied ex-State Trooper telling war stories about ballistic incidents and accidents. It was a strangely effective education. Not only did I learn that you shouldn't shoot a crack addict with a .22 ('It just makes 'em mad'), but I also had Rule Number One drummed into my brain: if you draw your gun, use it. Which is why I'm sure that The United Auto Workers (UAW) is about to bring GM down.
On Thursday, UAW Vice President Richard Shoemaker told all locals unions covering bankrupt GM parts supplier Delphi to conduct strike authorization ballots by 14 May. The chances of the vote going against the union's request are about the same as Zimbabwe's electorate voting out Robert Mugabe. In other words, 24,000 union workers are about to chamber a round in their Delphi destroyer. The first bullet was loaded by 8500 members of The International Union of Electrical and Communications Workers, who authorized a Delphi strike back in February. The next four rounds will come from the United Steelworkers, the International Brotherhood of Electrical Workers, the International Association of Machinists and Aerospace Workers and the International Union of Operating Engineers.
Organized labor will de-holster this week, when federal bankruptcy Judge Robert Drain (yes really) accepts Delphi's motion to void its union contracts. As sure as Officer Krupke drew his weapon and plugged a hole in the aforementioned crackhead, the unions will strike. All the media punditry claiming that the prospect of mutually assured destruction would stay the union's hand will disappear. All those analysts who claimed that union management would do anything to avoid putting Armageddon on their resume will watch as union workers cheer these self-same officials on the picket lines. It won't be pretty, and it will be fatal, for someone…
The media has focused much of its recent energy on GM's worker buyout offer– as if this expense-trimming plan could somehow denude and neuter union intransigence towards Delphi's proposed salary and benefit reductions. GM's much-heralded early retirement package offered thirteen thousand Delphi workers a lump sum to get the Hell out of Dodge. The UAW reports that just 3620 Delphi workers have bailed. Although the payoff deadline has been extended to June 30th, it's perfectly clear this plan will have about as much effect on a strike vote as toothpick on a walnut. Not that any of the principals care. While all this has been going on, the UAW, GM and Delphi have all been preparing for war.
What happened to all that talk about GM assuming responsibility for the difference between what Delphi wants to pay its workers and what it currently pays its workers? Gone. Instead, GM's on-again, off-again "subsidy" on Delphi parts– delaying the supplier's contractual agreement to lower its parts prices in the first quarter of '06– is off again. At the same time, the General is stockpiling Delphi parts (including complete vehicles), reducing Delphi content and offering Delphi contracts to other suppliers (e.g. spark plugs now come from Denso, Honeywell and NGK). There is no question whatsoever that GM is racing to reduce its reliance on Delphi before the unions walk and its Tier One mission critical parts supplier's business hits triage.
Meanwhile, Delphi is readying itself to give the middle finger to both the UAW and GM. While GM accounts for roughly 60% of its total turnover, Delphi's US operations are the least profitable part of its business. If Delphi jettisons GM's less-then-enormously rewarding parts contracts, its US labor costs and all those damn lawyers' fees ($61m since filing), the supplier still has enough cash flow and foreign capacity– both actual and potential– to survive. Delphi's losses for March were half that of the previous month ($56m vs. $136m); it could be an indication that Delphi has already begun outsourcing its operations.
It's a domino deal. When the federal judge issues his ruling, the UAW and its fellow unions must strike. Surrendering salary or benefits would be tantamount to accepting the death of unionism. The unions may lose Delphi and GM, but they'll remain intact at Ford and DCX. When the UAW strike begins, Delphi must move its operations overseas. They can't survive with their current US cost structure. And when Delphi stops selling The General parts, GM must die.
The world's largest automaker won't be able to adapt under fire. GM's too Delphi dependent, their bureaucracy too slow and inefficient, their image too tarnished and their finances too precarious to cope. As my firearms instructor said when asked for the best course of action in an impossible scenario, "Gun or no gun, when you're done, you're done.'
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