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Son Of God
Registered: 02/19/04
Posts: 1,459
Last seen: 4 years, 1 month
Union wages and outsourcing
    #3928637 - 03/17/05 01:50 AM (11 years, 7 months ago)

A Wrench For Parts Suppliers

I read the following article in BusinessWeek. The link above isn't to businessweek because the BSWK site needs a subscription.


A Wrench For Parts Suppliers

Labor and legacy pension costs from GM and Ford are hurting Delphi
and Visteon

Editors Note: On Mar. 4, after the following BusinessWeek article
went to press, Delphi Chief Financial Officer Alan Dawes resigned
after directors "expressed a loss of confidence in him," the
company said in a statement. Delphi also said it would restate
results from 1999 through 2004 due to errors in past statements.
Including the losses on Mar. 4, Delphi shares are down roughly 39%
over the past year.

Back in 1999, General Motors Corp.'s (GM ) plan to spin off the
Delphi parts division looked like an all-around great idea. By
carving out its components business, GM reckoned to shed nearly
43,000 union workers and trim supply costs. To make Delphi
attractive to investors, the auto giant blessed it with a clean
balance sheet and billions of dollars in contracts. If Delphi
could cut costs and win sales from other carmakers, executives
figured, it would prosper.

That expansive vision proved short-lived. Both Delphi Corp. (DPH )
and Visteon Corp. (VC ) -- spun off from Ford Motor Co. (F ) in a
parallel exercise in 2000 -- have been unable to repeat their
initial profit bursts after the spin-off. And now, as domestic
auto makers face deep cuts brought on by their own sales declines
over the last several years, the pressure is getting worse. With
sales at GM and Ford down again in February -- for the second
straight month -- Ford will slash production 10% in the first
quarter, and GM plans equally deep cuts in the second. That means
more trouble for Delphi and Visteon, which still sell about 50%
and 70% of output, respectively, to their former parents.
Hamstrung by a legacy of hefty labor and retiree costs, shares of
both are off 30% in the past 12 months, to less than $7 a share.

Delphi and Visteon are grabbing new business and diversifying. But
to survive, they must speed efforts to cut costs and shed bad
businesses. "Neither is sustainable in the current form," says
David Leiker, senior auto analyst at Robert W. Baird & Co. in

Like other parts makers, Delphi and Visteon have been battered by
rising commodity prices. But labor is their main problem. Thanks
to their ties with GM and Ford, the two pay most of their United
Auto Workers employees wages and benefits totaling about $70 per
That's equal to pay at car plants -- and up to 60% more than
at rival suppliers such as Johnson Controls Inc. (JCI ) and Lear
Corp. (LEA ) Delphi's 185,000-strong global workforce includes
some 25,000 UAW members in the U.S., while Visteon employs 18,000
UAW members.

Factory closings don't offer an easy solution. UAW contracts
require union approval for shuttering a plant. The company would
also have to transfer affected workers, rather than let them go.
The only way either could fully shed the high-priced workers would
be to buy them out -- but with losses piling up, that's a costly
option. Instead, idle workers at both companies draw some 90% of
their salary and benefits. J.T. Battenberg III, Delphi's chairman
and CEO, figures that's about $130,000 per worker. So, if Delphi
keeps all 3,000 of its recently laid-off workers idle for a year,
"that's $390 million off the bottom line,"
says Battenberg, who
announced he'll retire this year. Analysts say Delphi should hire
an outsider, since a non-GM veteran might be better at developing
new markets.

The suppliers' current contracts make it tough to grow at home.
Big Three purchasing agents use the threat of low-priced Mexican
and Asian parts to get lower cost contracts. And in the U.S.,
Japanese and Korean auto makers simply won't buy parts from union

Meanwhile, mounting retiree costs are adding to the pain.
Following a $600 million pension contribution it will make this
year, Delphi will have to add a further $1.1 billion. It may sell
assets worth $400 million to avoid eating into its $1 billion cash
reserve. Since sales to GM and Ford have slackened, Delphi has
borrowed heavily to cover rising health-care costs and Visteon
suspended its dividend last month.

The question is whether the two companies can build new business
and restructure old units fast enough to stave off a full-blown
financial crisis. Delphi expects to earn $100 million this year
from its auto-parts operations in China, where Visteon also is
growing. Both parts makers are pushing harder into electronics and
satellite radio. But none of that will be enough to cure what ails
both companies. Visteon is negotiating with Ford to help it sell
off nonperforming businesses like auto glass and chassis, which
account for 30% of revenue but up to two-thirds of its union work
force. Battenberg says Delphi, too, has a list of weak operations
to sell. But the way Ford and GM are headed, they had both better
move fast.

We like to talk about things like outsourcing on this forum.

$70 a hour for a is $2,800 every week, and that comes out to $145,600.00 a year for an auto worker in the union. And if they don't have any work for you, you get $130,000 and you can consider it paid vacation.

Does anyone want to step forward and admit that some of these guys have priced themselves out of the market?

And these plants are in places like rural Indiana and Tennessee. Can you imagine what you can buy with that type of jack in the back hills of Appalachia? You have to be kidding me.

I own my own business and I am a proud American. I think the median household income in this country is in the $40,000-$50,000 range, but my stats from memory may be outdated. I thought I was doing alright until I found out I need to be in the auto workers union, and preferably laid off and still paid. Unbelievable.

If you make $70 an hour and you contribute 15% to your 401K, your contributions before any company match would be $21,840.00. I believe that figure is above the federal poverty level, and that is just your retirement contributions for one year.

The whole thing blows me away. I thought they made less than half that. And half that is $73,000.00 and that is a pretty decent wage in middle America. Color me dumbfounded.

Tastes just like chicken

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Son Of God
Registered: 02/19/04
Posts: 1,459
Last seen: 4 years, 1 month
Re: Union wages and outsourcing [Re: JesusChrist]
    #3928723 - 03/17/05 02:08 AM (11 years, 7 months ago)

I am drinking and now I am on a roll. I figure I might as well respond to my own post. Hell, I might even rate it 5 shrooms.

Think about this. These companies have opened up plants in the Pacific Rim. Why wouldn't they. Why would they ever build another plant in America?

If they did, first off, they would have to pay union wages of over $145,000.00 a year. Secondly, they could never close it without the unions permission, and then they would have to pay the people anyway.

That is fucking madness. Of course these jobs are leaving. Who is actually kidding who? A lot of people like to put the debate in terms of an $8 an hour job at Wal Mart vs. a $15 an hour job with benefits. It sounds a hell of a lot more convincing when you appeal to people in those terms. This my friends is the other side of the spectrum, and my God it is the ugly underbelly of the beast.

Maybe if we didn't have such outrageous Union demands, you could quadruple the jobs and pay them all $25 an hour. That would be $52 grand a year and still above the median household American income.

Fucking madness. If I had to pay some high school graduate $145,000.00 a year you bet your sweet ass I would move every job I could out of this country. Fuck-in A.

And you wonder why Unions have been accused of racism? Well, if you are the union boss you are handing out jobs that pay $145,000.00 a year like candy. People are going to suck and fuck for those jobs. Favors and loyalty will be rewarded. Sadly and often ignored is the fact that you can't give such a choice job to a "dumb nigger". Unions throughout history have tended to discriminate against blacks and minorities and that is the ugly truth. You have to wonder why blacks and big unions belong to the same political party.

I am going to drink more beer and post to myself again. I think I am doing a great job!

Tastes just like chicken

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Registered: 06/15/02
Posts: 15,608
Re: Union wages and outsourcing [Re: JesusChrist]
    #3928767 - 03/17/05 02:17 AM (11 years, 7 months ago)

Why would they ever build another plant in America?

They probably won't.

The GM CEO took a lot of heat for shutting down all of those Flint factories (watch "Roger and Me" by Micheal Moore). But what else could he do? Should he have sat there and watched the company go bankrupt (and then NOBODY would have had a GM job) in Flint? Or does he move some operations to an area that is cheaper to operate in? The answer is obvious. We Americans cannot compete with someone who is willing to work in a shithole factory, live in a hut, and work for 2 cents an hour. Until us Americans are more competitive with foreign workers, we will continue to lose our jobs.

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Registered: 10/13/02
Posts: 2,876
Loc: ATL
Re: Union wages and outsourcing [Re: JesusChrist]
    #3928841 - 03/17/05 03:01 AM (11 years, 7 months ago)

We need to allow competition to work properly. I have no problems with unions, but I hate the unholy mating of unions with government. If we allow companies to freely hire and fire workers regardless of union affiliation then we will quickly find our way out of many problems we face today. If a company doesn't want to deal with unions then don't force them to. No one is forcing anyone to work for them. If a nice moderate union develops then companies will deal with them simply to keep the trained workforce they have. As with most economic issues the key is to keep government the fuck out of the way.

"Of all tyrannies, a tyranny exercised for the good of its victims may be the most oppressive. It may be better to live under robber barons than under omnipotent moral busybodies. The robber baron's cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end, for they do so with the approval of their own conscience." - C.S. Lewis

"I would rather be exposed to the inconveniencies attending too much liberty than to those attending too small a degree of it." - Thomas Jefferson

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Son Of God
Registered: 02/19/04
Posts: 1,459
Last seen: 4 years, 1 month
Re: Union wages and outsourcing [Re: RandalFlagg]
    #3928850 - 03/17/05 03:08 AM (11 years, 7 months ago)

I am not talking about 2 fucking cents. I am talking about paying people $145,000 a year whether you have work for them or not. That is what blew me away.

I am getting drunker than a skunk tonight, but those numbers simply blow me away. Who do you have to fuck for one of those jobs? I want one for me, and one for my wife. Then we can pull home close to $300k a year.

It also appears to me that John Kerry was against tax cuts for union auto workers. No wonder so many of those folks vote republican.

Tastes just like chicken

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Son Of God
Registered: 02/19/04
Posts: 1,459
Last seen: 4 years, 1 month
Re: Union wages and outsourcing [Re: z@z.com]
    #3928853 - 03/17/05 03:10 AM (11 years, 7 months ago)

And ZZ, I always seem to agree with your posts. The latest one is no exception to that rule.

Tastes just like chicken

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Registered: 06/15/02
Posts: 15,608
Re: Union wages and outsourcing [Re: JesusChrist]
    #3928864 - 03/17/05 03:17 AM (11 years, 7 months ago)

I am not talking about 2 fucking cents. I am talking about paying people $145,000 a year whether you have work for them or not.

And I was agreeing with you. My two points in this whole thing are as follows:

1. Unions seem to encourage laziness, overpayment to employees, and circumstances that discourage competitiveness.

2. Americans work for much more than what other people work for. We can't be competitive when going up against people who will work for 1/10 of what we work for.

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Fred's son

Registered: 10/19/00
Posts: 12,949
Loc: Dominican Republic
Last seen: 1 year, 9 months
Re: Union wages and outsourcing [Re: JesusChrist]
    #3929238 - 03/17/05 08:19 AM (11 years, 7 months ago)

The autoworkers don't see $145,000 a year on their paychecks. The article says that wages and benefits total $70 an hour. That includes paid holidays, employer contributions to pensions, paid sick leave, employer contributions to Workman's Compensation, Social Security, health and dental insurance, paid maternity leave, paid compassionate leave, etc. All of those things are real costs to the employer but don't translate directly into immediate cash compensation for the employee. In some cases (Workman's Comp) they may never even be used by the employee.

Even presuming those benefits account for a third of the $70 figure, that still leaves a lot of money going directly to the employee -- pretty close to a six figure income. Autoworkers have had it cushy for a very long time now.



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 User Gallery

Registered: 11/08/02
Posts: 32,665
Loc: Ripple's Heart
Re: Union wages and outsourcing [Re: JesusChrist]
    #3929861 - 03/17/05 12:03 PM (11 years, 7 months ago)

unions are garbage.

All I know is The Growery is a place where losers who get banned here go.

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