Steve Miller on Delphi BK

[haha]

Steve Miller, whose profession is handling turnarounds and/or BKs is now CEO at Delphi. Very good summary of what happened, and its meaning in  larger social context.

Ha

 

[MasterBlaster]

Did you intend to include a link to an article ??

 

[JPatrick]

Did you intend to include a link to an article ??

I'm prepared to wait for as long as it takes!
How about the rest of you?  Do you want a link?
THEN LETS HEAR IT
WE WANT A LINK- - -WE WANT A LINK!!!

 

[Mr._johngalt]

WE WANT A LINK- - -WE WANT A LINK!!!

Also known as the Jimmy Dean mantra!

JG

 

[JPatrick]

Also known as the Jimmy Dean mantra! 

JG

That's good, but now I'm hungry

 

[haha]

My apologies--

http://www.businessweek.com/bwdaily/dnflash/oct2005/nf20051011_3919.htm

Ha

 

[Marshac]

In the midst of these trends, the unions in the traditional steel companies and the traditional auto companies bargained for 30-and-out. The theory was, create more jobs by retiring people sooner. And aren't 30 years in a grimy factory enough? But this means that people can start work at age 20, retire at age 50, and expect full pensions and health care till age 90 or so. In other words, enjoy the fruits of your labor for more years than you were at labor. As a society, somebody has to pay. And to the shock of the Big-Three auto makers, they've found that customers won't pay when they have choices.
...

My worries go beyond the auto industry. What I am describing is also embedded in our debates over Social Security and Medicare. The overwhelming voltage in the political third rail of touching these entitlements will forestall corrective action for years, but the problem will only grow. I fear something like intergenerational warfare, as young people increasingly resent having their wages reduced and taxed away to support social programs for their grandparents' income and health-care concerns.

If this is news to anyone, then you need to read the coming generation storm.

 

[wabmester]

Is that true, Marshac? Do you whippersnappers intend to rumble with us old farts? Hmm, my Tai Chi may come in handy after all. Prepare yourself for a little "catching the fish!"

Anybody see opportunity here? GMAC's bonds have been really beat up by this stuff, and in theory, they should be independent of GM's liabilities. I think.

 

[Marshac]

Do you whippersnappers intend to rumble with us old farts? 

Only those of you not on electric scooters.

 

[JPatrick]

Steve Miller, whose profession is handling turnarounds and/or BKs is now CEO at Delphi. Very good summary of what happened, and its meaning in  larger social context.

Ha

A good summary, but I have heard that once again, the officers of Delphi looted the company in the months prior to the filing.   
Delphi will either be the start of the auto bankrupcy wave or it may end of it if the unions cave fast enough.  I wouldn't bet on it.

 

[haha]

A good summary, but I have heard that once again, the officers of Delphi looted the company in the months prior to the filing.   

Are you referring to the severance deals that they cut? I think they may in this case be justified. This is not a case of mismanagement; it is a case of impossibly uncompetitive labor contracts, added to GMs failing health as Delphi's major customer.

A company can't be turned around without up to date management, and these guys arguably should be protected so they make a good effort to stay the course, and face down the union. People like Miller get their money upfront, just like bankruptcy lawyers.

Anyhow, like Steve said, "Folks- be sure your kids get an education so they are not expecting to draw $60/hour for a job that is worth $7 on the world market."

Ha

 

[JPatrick]

Are you referring to the severance deals that they cut? I think they may in this case be justified.

Justified?  Time will tell.
This from USA Today; ;
Attorneys for Delphi defended a recent upgrade in the severance deals for executives. Delphi beefed up severance agreements for 21 top executives Friday, making them eligible for 18 months of pay and at least a portion of their bonus if Delphi lays them off or they leave voluntarily. In exchange, the executives agreed not to work for competitors for the 18 months
-----------------------------------------------------------------------------------------------What caught my attention was the last minute "beefing up" and of course Delphi happens to be something like 10 Billion underfunded in the ol pension plan at the same time.
But. I agree, the key line is the one pointing out the hard cold fact that you can no longer have a cush career (and an ER) by pushing auto parts.
That is going to be a major shock to a lot of lifestyles.

 

[justin]

I read an article about Delphi a few days before they filed BK. The company was asking for $14-$18/hr cuts in the average wage of $65/hr. The starting wages would be (heaven's no!!) $10/hr plus benefits.

How does a company end up paying its manufacturing employees $65/hr when you can go 1000 miles south and pay them 1/10 of that? Or even less in many other countries.

I have no sympathy for the soon to be laid off employees and cuts in wages, benefits, and pensions.

 

[haha]

I read an article about Delphi a few days before they filed BK.  The company was asking for $14-$18/hr cuts in the average wage of $65/hr.  The starting wages would be (heaven's no!!) $10/hr plus benefits. 

How does a company end up paying its manufacturing employees $65/hr when you can go 1000 miles south and pay them 1/10 of that?  Or even less in many other countries. 

I have no sympathy for the soon to be laid off employees and cuts in wages, benefits, and pensions. 

All together now, say UNION.

Ha

 

[justin]

All together now, say UNION.

Ha

Obviously they were unionized. Why didn't they close up shop, let the union members run out their contracts and then open up in a low labor cost area? What state of affairs in the company allowed them to get so far in the hole that is unionized labor costs? Why not pull a Northwest and not renew a contract, then find replacement workers? I know we have the fair labor relations act and board to deal with in the US, but is the bottom line there is nothing these big companies can do to fight back against the unions (besides go belly-up)?

 

[brewer12345]

Obviously they were unionized.  Why didn't they close up shop, let the union members run out their contracts and then open up in a low labor cost area? 

That is exactly what they are threatening to do if the UAW won't play ball.

There is going to be a nasty adjustment process in parts of the industrial midwest as the union workers adjust to a significantly lower wage. Ain't gonna do anything good for RE values or the general economy in flyover country.

 

[MasterBlaster]

I don't have alot of sympathy for unions and union work rules.

However, It makes you wonder about this race to the bottom:

Just who's job is really safe in this country ?

What job couldn't be done for less elsewhere ?

How can this country ever compete with people that live in mud-huts ?

 

[brewer12345]

I don't have alot of sympathy for unions and union work rules.

However, It makes you wonder about this race to the bottom:

Just who's job is really safe in this country ?

What job couldn't be done for less elsewhere ?

How can this country ever compete with people that live in mud-huts ?

1) Nobody's job is safe.

2) Many of them, at least right now. But the jobs that can't be done overseas change over time so be ready to reinvent yourself as long as you plan on staying in the labor pool.

3) Easily, so long as we continue to have the best technology, the most productive workers, strong property rights, and the freest and fairest capital markets.

 

[MasterBlaster]

Brewer:

Well that's the standard answer - just reinvent yourself .

Other countries have and will get technology over time, have incredibly productive workers, property rights are comming into being, and capital is mostly free to flow.

Personally I am not so concerned about myself but about this country and its' people. Projecting forward the future looks somewhat bleak.

Really though, just what does this country make that can't be produced for less elsewhere ? So no matter how much I/you re-invent yourself you are at a distinct disadvantage to the competition.

 

[brewer12345]

Brewer:

Well that's the standard answer - just reinvent yourself .

Other countries have and will get technology over time, have incredibly productive workers, property rights are comming into being, and capital is mostly free to flow.

Personally I am not so concerned about myself but about this country and its' people. Projecting forward the future looks somewhat bleak.

Really though, just what does this country make that can't be produced for less elsewhere ? So no matter how much I/you re-invent yourself you are at a distinct disadvantage to the competition.

Actually, the US is very, very competitive (world leading) in many areas, especially high tech and high value-added stuff. We are also bar-none the best in many service areas, such as financial services.

 

[MasterBlaster]

Actually, the US is very, very competitive (world leading) in many areas, especially high tech and high value-added stuff.  We are also bar-none the best in many service areas, such as financial services.

Well, that may be true - for now. But since we can't graduate many engineers/scientists relative to the competition the technology advantage we have now is likely to be lost sometime into the future.

The financial markets/services will whither as the economic base of the country whithers.

 

[wabmester]

Actually, the US is very, very competitive (world leading) in many areas, especially high tech and high value-added stuff.  We are also bar-none the best in many service areas, such as financial services.

High tech and financial services are also two of the most easily outsourced types of employment.    Indians, Russians, and Chinese are very well educated.   I expect them to grow their market share in these areas much faster than we do, and growth is what attracts capital.

 

[JPatrick]

If all else fails, there may be a good opportunity in selling mud huts in the USA, but better yet, we need to keep coming up with more goodies like the I Pod which of course we then sell to the overseas dudes  that now have money cause they stole our other jobs.

 

[ProfHaroldHill]

.

Personally I am not so concerned about myself but about this country and its' people. Projecting forward the future looks somewhat bleak.

Just about all of the studies of happiness show that happiness increases with material well being only up to a certain point, which is the point where the basics are met. Someone who has a decent apartment and who can afford a TV and a computer probably has enough money to have reached this point. Beyond that, happiness is found to be determined by a different set of factors that do not include material well being (i.e., money). So . . . if the level of income in the US stagnates, or even declines, it may make very little real difference to most people (could be bad news for investors and ERs, though). At some point, enough really is enough. To make a short story long -- therefore, the word "bleak" might not be apropos, except regarding investors and ERs.

HH

 

[Nords]

Just who's job is really safe in this country ?

What job couldn't be done for less elsewhere ?

Carpenters, plumbers, electricians, painters, mechanics... an entire service industry!

I'm teaching my kid all those skills. She can't believe that she can get $10/hour for them. Most of you wouldn't believe it either, but her ignorance gives her an entirely different perspective!