I Am Outraged About Global Competition!
[Michigan] Governor Jennifer M. Granholm today issued the following statement on the announcement that Delphi has filed for Chapter 11:
I am profoundly disturbed by Delphi's decision and what it means for the nearly 15,000 Michigan employees, many of whom have worked for decades for the company based upon the promise that they would have a pension and health care when they retired.
Globalization is ravaging Michigan's manufacturing job base. Delphi's decision will undoubtedly have a ripple effect through Michigan's economy - an economy already reeling from outsourcing.
I am angry that this action occurs one day after headlines blared that Delphi employees were being asked to accept brutal, draconian pay cuts while upper management is being offered golden parachutes.I am equally angry about the lack of support from Washington for the industries that made our country great. There is an apparent indifference in Washington to the human pain that so-called free trade has brought to average, patriotic, hardworking citizens who believe in keeping promises.
Moreover, the silence from the federal government is deafening. Washington negotiates these trade agreements and is not offering needed investment in either training our citizens or providing assistance with health care to allow both workers and businesses to be competitive.
If we as a nation can invest billions in infrastructure at home and around the globe, surely we can invest in the human infrastructure -- our American citizens -- whose middle class dreams and plans are being rapidly extinguished by race-to-the-bottom global competition. - Governor Jennifer M. Granholm.
Mrs. Granholm, governments do not "allow" competitiveness. The efficiency fatcor of a particular business denotes its level of competitiveness in a free market. Bloated, bureaucratic, mismanaged operations such as Delphi cannot compete against leaner competitors. Those are the ABC's of Business 101.
Perhaps, Mrs. Granholm, you can ask Delphi's Big Daddy - General Motors - why it wil not save its underling? Ford likely will not be cutting the umbilical cord to Visteon anytime soon, so why is it that GM is so willing to let Delphi fail? Hint: start with the health care beast, and go from there. American auto companies endure a $1500/per vehicle in health care costs. It costs American auto companies almost 3x as much as their Japanese competitors to launch a new car . The Japanese plants can run several models through one plant, and the Americans? One or two, on average. In addition, GM lost $3.3 billion on its North American automaking operation in the first six months of the year. GM needs better, cheaper suppliers.
If the Michigan labor force were to offer up a more competitive wage system - read: no unions - surely the automakers would not be fleeing to the South, Canada, and elsewhere. Were Northern, union workes less inclined to gut their companies via collective bargaining sanctioned by the government, perhaps plants in Michigan would cease to be closed so "mercilessly?" By the way, Mrs. Granholm, well-paid and grateful workers in the South continually reject the UAW of their own volition.
Comments (15)
Ohhh Henry
As usual, every socialist assumption - our workers need training, they need assistance with health care, they need protection from competition, etc. - is really an insult masked as compassion: our workers are too stupid to retrain themselves, too feeble to arrange for their own health care, too lazy or unproductive to compete with the Japanese.
Free trade worked great for Michigan when they had to compete with industrial powerhouses like New England, New York, Pennsylvania and Ohio. What happened to Michiganders to render them unable to compete with far less educated and far more distant workers in places like Mexico and China? Oh yes, I know - government and unions happened to them.
Published: October 9, 2005 10:25 PM
eggroid
Wow am I glad I don't work for Delphi any more. The UAW just won't stop until all of Detroit is a desolate a wasteland as Flint. Good Lord, I hope that won't mean having to endure another Michael Moore movie about outsourcing hurting Michigan...
Published: October 10, 2005 7:06 AM
David White
On the other hand, as Addison Wiggin quotes Marc Faber in "The Demise of the Dollar":
"[A]s a result of the breakdown of communist and socialist ideology and the end of the isolationist policies on the Indian subcontinent, the world's economic sphere was enormously enlarged with close to three billion people joining our [somewhat] free-market, capitalist system."
Wiggin then goes on to say that "The fact that U.S. jobs are being transferred to countries that were previously in the Communist bloc makes the point: As long as these countries were our enemies, there was no trade between us. Now that we are all trading partners, all of those people are a cheap labor pool."
So I ask you, with the world thus going "flat" (no, I'm not a Thomas Friedman fan, but his overall point is valid), how does the massive capital flight that we are experiencing -- in which the U.S. has already moved from a save-and-produce economy to a borrow-and-consume economy (to the tune of over $2 billion a day and counting) -- further our interests?
Face it, we live in a world so unbalanced by centuries of state oppression that "free trade" is for Americans no more than a "free fall" whereby US corporations cherry-pick the global labor market (as Delphi will no doubt be forced to do as it emerges from bankruptcy). No, there might not be anything that can be done to stop it, but I do not find ridicule to be an appropriate response to what obviously spells disaster for the US economy.
Published: October 10, 2005 8:41 AM
rico soma
All the usual comments one would expect to see on this blog re: global competition. A flat world is an increasing reality, something overpaid American workers will have to deal with. What I find interesting is not one comment on Michigan Governor's assertion about Golden Parachutes, the "Dark Side" of "The Market".
Published: October 10, 2005 9:38 AM
tz
One problem is that Delphi was more like a government than a business.
The management class was mainly there to promulgate regulation and discourage innovation. Any wonder they would reward themselves for the destruction?
The UAW wants socialism, and tends to make the corporations act like a commisariat. Yet socialism fails - when they try to do economic calculation based on something other than price.
But Ms Granholm, remember that we've had both democrats and republicans in the various houses in DC over the past decades. They passed noisome acts to help the environment, the disabled, and whomever had a strong lobbying group at the time. Ought we start by being sensible? Why would any sane businessman want to locate in a state where the various bureaucracies will immediately attack like a pack of dogs, and then the Feds can pick over the carcass. Better make whatever it is in China.
The old liberalism, and what passes for conservatism these days is actively destructive to business - except for the corporate cronies and corporate welfare queens, to bad Delphi isn't Haliburton - Michigan has it's own version of picking winners.
Before complaining about lung cancer and empysema, maybe one should quit smoking.
Published: October 10, 2005 10:16 AM
Roger McKinney
Reminds me of a comment by Ken Blanchard, co-writer of the "Excellence" series with Tom Peters. Blanchard wrote that few businesses understand their costs. Most blame labor. But overhead is usually 3 to 4 times the cost of direct labor. As with Delphi, management always wants to beat up on labor, but my experience has been that poor management is the biggest cause of business failure, not labor costs. I'm not a fan of unions, but they're not Delphi's problem. Poor management is.
Published: October 10, 2005 11:41 AM
Lisa Casanova
Rico,
I know a lot of people have a sense that certain people (CEOs, etc.), make "too much" money or get "too many" benefits. I don't see how that qualifies as a dark side of the market. The idea that someone else is making more money than they deserve from their employer is completely subjective. To talk about it as if CEOs are making too much money while auto workers are making too little seems to treat the two as though they are interchangeable. Personally, I'm disinclined to criticize the amount someone is getting paid to do something I certainly couldn't do myself.
Published: October 10, 2005 12:06 PM
Yancey Ward
Rico Soma,
The golden parachutes you and Granholm mentioned are important, but these compensation levels are a direct result of corporate structure, a structure set by government laws and regulations. However, were these companies run as proprietorships or limited partnerships, these people would take similar compensation levels to the executives of today since they would the owners, and would largely be directing the company- being executives themselves, or by being owner-boards of directors. Present corporate structure essentially means that the management are the defacto owners, and as such, take large compensations.
Published: October 10, 2005 1:02 PM
Rico Soma
The problem with Golden Parachutes and excessive Senior exec compensation is that the REAL owners of the companies (the shareholders) don't receive value for their investment since this compensation is not tied to performance.
Published: October 10, 2005 1:40 PM
Yancey Ward
Rico,
Shareholders could, theoretically, exercise real restraint on management compensation. However, the dilutive nature of corporate structure makes their control dilute without great collective action. If management is looting the company, it is the shareholders fault in the main.
By the way, when I wrote "the golden parachutes...are important", I did not mean to endorse them, only that the discussion about them is important. I need to slow down a bit when I write.
Published: October 10, 2005 2:08 PM
Vanmind
Roger,
Well, think about it: management is more than likely made up of MBAs, and MBAs are unionists.
Published: October 10, 2005 3:40 PM
Vince Daliessio
It has taken decades, but Americans are getting over their hangups over buying 'foreign' products. The long, long period where the management and labor of these companies could rely on the xenophobia and patriotism of the american people to support the merchantilism and protectionism that funded their bloated compensation is over. Americans a a patient, tolerant people, but their patience has run out. So long, Delphi.
Published: October 10, 2005 8:51 PM
Stefan Karlsson
I am not so sure that even protectionism would have helped Delphi very much. Delphi's principal customers in Detroit have mainly lost market share to Japanese car companies and these have accomodated virtually their entire sales increase by building plants in the U.S. (Not that competition with well-paid Japanese car workers could even remotely be considered "race to the bottom") which means that they can't be stopped by tariffs or quotas.
Published: October 11, 2005 7:28 AM
William
Well another shell of a company crashes into health care and pension liability oblivion. I am glad I have a 401K (Bills Money) and not a Pension (The UAWs money.). And I have health care that is growing at 20% a year that I pay more of each year.
The only way Washington with all its trillions of $ stolen from other tax payers can do to help these workers in Michigan or anywhere else is to give those trillions back in tax cuts and stop messing in things that Washington knows nothing about.
As for Delphi, they are on their own and they should be. As if the government and all of its stupidity could help Delphi compete in a world wide market.
Published: October 11, 2005 8:23 PM
Sione Vatu
This is just the first of many. Soon it will be General Motors and then Ford. We could end up witnessing this sort of thing occur right across the USA. I wonder how the prissy governor will act then.
What drives these companies into the ground are the dislocations built into them by govt. regulation and legislation. That's the source of the problem. The result is the destruction of productivity and the evisceration of value from the organisation. A collapse is inevitable.
Delphi will restructure now. It will emerge with its off-shore plants intact and working to full capacity. Meanwhile US-domestic plants will either be shut, down-sized, amalgamated or moved. If this round does not work the next round will see the assets sold off, either completely or in parts.
As far as the employees on their bloated benefits are concerned, how could they not be aware of how poorly the company was faring? Frogs, the lot of 'em. The entire industry has been aware of Delphi's problems for a long time now. There definately was plenty of opportunity to get out and move on to greener pastures or to take steps to mitigate the loss. Frogs.
Published: October 12, 2005 3:53 PM