Blog: Dave LeggettDelphi, GM and the UAW: GM gets tough

Dave Leggett | 13 October 2005

Delphi going into Chapter 11 bankruptcy this week may well mark something of a watershed for the US auto industry as well as a sea change in attitudes at GM.

It seems that someone at GM said: “Right, that’s it. I’ve finally had enough of this. We’re not going to do a Ford-Visteon style bail-out; we’re not going to simply take-back Delphi’s high labour costs and most unprofitable plants, or pay over the market rate and the UAW can just take a hike. We’ve survival problems of our own and people had better realise just how serious things are. Chapter 11 for Delphi will enforce a welcome dose of reality and serve as a warning. Pantomime time is over.”

I must admit I was surprised. I fully expected that a three-way GM-Delphi-UAW deal would be announced just ahead of that October 17 deadline set recently by Delphi CEO Steve Miller. A fudged compromise then business as usual seemed likely.

But GM’s management has apparently grown some balls and scuppered a potential bailout deal, directly triggering Delphi’s Chapter 11 filing. GM avoiding responsibility for a mess that is partly of its own making? Of course, a strong case can be made for that view from just a cursory glance at Delphi’s history, but looking ahead, a change of course for GM seems to have emerged based on a new hierarchy of least-worse options.

Delphi’s bankruptcy could still mean that GM eventually picks up a massive tab for Delphi retirees and that, combined with the potential for damaging industrial action at Delphi in the future, could actually bring the day of a Chapter 11 filing closer for GM. There are sizeable risks here and GM seems finally prepared to swallow them.

GM has certainly thrown a gauntlet down to the UAW: the old game’s over; the new one starts right now and it’s called ‘survival’.

Dead-man-walking Delphi in the US now at least has a great chance, under Chapter 11 restructuring, to scale back labour costs and manufacturing capacity to a more sustainable level.
What will the attitude to a newly aggressive GM be at the UAW? They won’t like it, but maybe there’ll be a realisation that some old assumptions have been invalidated. Delphi today, GM in Chapter 11 tomorrow?

Some commentators believe GM may by now have actually concluded that the pain of a costly strike could be worth it if that finally addresses UAW cost issues. Of course there’ll be some politicking and games of bluff ahead, but a square off may not be far away now.
Where GM leads, maybe Ford follows. What happens at Delphi in the US now, especially on labour rates and benefits, will certainly be closely watched by the whole US automotive industry.

But just as slimmed down Visteon is now being talked about in a more positive way, so Delphi is a company that is far from being a complete no-hoper or basket case. The hope has to be that the US auto industry’s participants, collectively, can come out of all this leaner and fitter and halt their seemingly inexorable decline and loss of market share at home.

There’s an opportunity ahead if some of the serious obstacles to domestic corporate growth, in a global setting, can be taken away or at least greatly reduced.

There may be troubles ahead, as the song goes. But it could just be that, through its bold and catalytic actions over the past week, GM has actually done the US auto industry as a whole a good turn.

USA: Significant job cuts key to Delphi reorganisation

USA: Analysts say Delphi bankruptcy could shake up US auto industry

A very full and statesman-like address from Steve Miller sets out the Delphi stall extremely well, I think. Great speech in terms of context and content provided; statesman-like in tone:

USA/UK: Full text of remarks made by Delphi CEO following announcement of Chapter 11 reorganisation

Rob Golding also puts things neatly into perspective:

GOLDING’S TAKE: The obstacle at Delphi

How the news broke, with immediate reaction and analysis:

USA: Delphi files for Chapter 11 bankruptcy protection


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