Driving It Into The Ground

LATimes (10.09.05):

"Delphi Corp., the nation's largest auto supplier, filed for bankruptcy Saturday, alarming a U.S. auto industry already weakened by high labor costs and falling market share. Delphi's bankruptcy, which is expected to result in plant closures and layoffs, is one of the largest in U.S. history. The company has 50,000 U.S. employees." Nation's Largest Auto Supplier, Delphi, Files for Bankruptcy

Delphi chairman and CEO Robert Miller, "a restructuring expert who was hired in July, had threatened to take the company into bankruptcy if he failed to reach a restructuring agreement with GM and its largest union, United Auto Workers." Oh gee. This is a surprise: "UAW officials blasted Delphi's decision to file for bankruptcy one day after sweetening the severance packages of 21 top executives to help persuade them to stay at the company." "Delphi said it made the change after determining its severance package for top executives was not competitive." Delphi's bankruptcy attorney, John Butler Jr., said that in addition to "'some restructuring of its collective bargaining agreements'", Delphi will also "try to scale back pension benefits". According to Butler, "'The current level of retirement benefits is unsustainable and will eventually sink the company.'" So, you might ask, who set the current level of retirement benefits? Suspects would include past and present top executives. So they fucked up with the original pension benefit and severance deals, and now they want a do-over which, as it were, includes decreasing benefits for the rank and file and increasing those for the top dogs. One must have priorities, musn't one? What do you mean they fucked up with the pension benefits? "The filing could also mean that the government may have to assume responsibility for a pension fund that is nearly $11 billion short of its obligations, according to a calculation by the Pension Benefit Guaranty Corp. obtained by the New York Times." Delphi says that if the pension fund is not terminated, and continues to receive new money, it'll only be "about $4 billion short of its obligations." And that's just the pensions. Delphi wants "workers to accept wages of $10 to $12 an hour, compared with the $26 to $30 an hour most make today." CEO Bob has said that "the UAW's comments on proposed pay levels were 'directionally correct'", which is one of the more interesting ways we've ever heard for describing a huge pay cut. Well what the hell happened? Seems like the geniuses at GM really had this one figured out. AP (10.09.05):

"When GM spun off Delphi in 1999, the automaker agreed to pay health care and pension benefits for Delphi retirees in the event of a bankruptcy filing within eight years. Financial analysts have projected that this provision could cost GM $6 billion at a time when it can ill afford more problems." Top U.S. supplier of auto parts seeks Chapter 11 / Delphi's filing is largest in car industry history

So let's see. Not only this deal, and the pensions, but GM sales have been dropping like a rock, its bonds have been downgraded to junk junk status, and the folks running the are still there. Uhhh, yeah; we get it. Then there's Toyota. Detroit News (05.11.05):

"Toyota Motor Corp., in another challenge to General Motors Corp. and Ford Motor Co., plans to increase spending on new plants and products by 15 percent in the coming year. After posting record sales and earnings for the fiscal year ending March 31, Japan's largest automaker said Tuesday it will spend $11.8 billion in the next fiscal year on research and development, including additional gasoline-electric hybrid models." Toyota plans to increase product, plant investment

"Toyota has been doing so well in contrast to faltering U.S. automakers that Chairman Hiroshi Okuda has even expressed concerns and said he was considering offers of help." "Okuda has said Toyota is willing to consider raising prices on cars in North America to give the U.S. automakers breathing room, as well as possibly sharing its hybrid vehicle technology. Toyota and General Motors deny they are already in talks." Check this out: Toyota's "Message From Top Management". Wonder if they might be on to something here. Toyota President Fujio Cho reviewing GM's net profit.