6 May 2006
By Robert Farago





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 in fourteen days, 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."

 

I still don't believe that the unions are that self-destructive. The majority of the UAW workers have zero marketable skills besides auto assembly (unless they picked some up at the job banks). If they strike, all the McDonalds and other menial jobs in the Detroit area will quickly be overstaffed. 16$/hr is still a hell of a lot better then minimum wage. They are not that stupid... I hope.

Whatever happens, a straddle on GM stock should be very profitable on May 19th. Anybody know what time a decision is expected?

 

flush.............

 

Strike authorizations are normally just that. It gives negotiators to call one if things go south without any hope of recovery. Though I'm not worried by this alone, and that GM and the UAW have a newfound affection for each other, this situation is far from normal.


I did a total flip on the UAW vs Delphi issue when I realized Delphi's CEO was actually doing everything in his power to sabotage talks and undermine GM's efforts to get an agreement.


Personally, I think Delphi's CEO has layed a trap to destroy the UAW (and maybe turn the public against unions altogether), even if it means destroying not only any chance of Delphi having a future, but also even if it means bringing down General Motors and a good portion of the auto industry in the process.

The UAW's upper leadership grasps the situation, but there are plenty of low level radical wanna-bes who are spoiling for a 1930s style labor rebellion. Till now I've underestimated them, but I think they have more influence than I initially thought.


In ironies of ironies, just when General Motors seems poised to reverse the actions of it's old management by bringing out new and great products, now they risk going under because the old management spun off Delphi and created the very monster that just might kill GM afterall.

 

Damn, this is some angering and depressing news all at once if all this comes to fruition. Just when it seems GM is poised to turn the corner, this comes up.

 

There has to be something else to this. I can't believe that right as GM shows some signs of life they take another kick in the gut and go down for good.

Also, even though he's a complete nutcase, somewhere off in the distance I hear Buickman laughing

 

So many logic flaws in the author's piece... ehh it's not worth the bother to debate. Just a bunch of anti-GM trash.

 

Oh I was in no way endorsing him...I recommended he take his "genius" to Ford if it was so great, but BM and all the rest of the GM bashers will have a field day with this one.

 

It will be pretty interesting to see what this GM Deathwatch guy is going to start writing about once GM manages to turn its fortunes around.

Having 70+ articles about how a certain company is going to go under definitely won't look good on his resume if said company ends up prospering when all is said and done...

 

When is the actual decision expected? I looked around and the closest I can find is early to mid June. Anybody have a concrete date?

 

There is no concrete date set yet, as the judge isn't even done with the hearing yet. It's too early to go penciling in someone on your calendar. Look at what has happened with Tower Automotive - that situation has been unresolved for quite some time now, and the bankruptcy judge in that case continues to extend the deadlines.

 

If I was GM I'd be sending tons and tons of RFQ's to Bosch right now. If not even start moving on some.