When Delphi, the nation's largest auto parts supplier, declared bankruptcy a couple of days ago, it was the end of a way of life for American automobile workers, the last large group from the smokestack era.
Until 1999 the company was a subdivision of General Motors. It was, in the lingo of business, spun off as a separate company in hopes it could pick up new customers as an independent entity. But with its high wages, medical benefits and retirement costs, Delphi was being killed by foreign competition. It lost $4.5 billion since 2000 and cannot pay its workers' salaries nor honor its pension obligations &3151 a debt of billions the company does not have.
Money-losing companies are going into bankruptcy courts pleading with judges to break their union contracts before the union contracts break them. Delphi, which has 33,000 union employees, is paying its workers a wage and benefits package worth about $65 an hour. Now it wants to pay them about a third of that, a disaster for a family that has borrowed money for a house, cars and education. As one of Delphi's workers was quoted as saying, under such a new pay scale he would not be able to afford a GM car. Quite a note when you recall that in 1914 Henry Ford made the world come to a stop by announcing that, thanks to the system of "mass production" he had invented, he was raising his workers' pay up to $5 a day so they could buy Ford automobiles.
Prospects for GM itself are no less bleak. The company has more than a million retirees and no means of keeping up the payments to them. Every time it sells a car in the United States it loses money, and it would be in bankruptcy court next to Delphi if it didn't have a pile of cash in the bank to live off of. In a few years it will be gone, and then what?
Ford, which did a similar spinoff with a new company it christened Visteon, is also in trouble. The Ford logo, which for the past 102 years was as recognizable as the Statue of Liberty, is in peril of vanishing. When it does vanish it will be akin to waking up one morning to learn the Rocky Mountains have gone.
For the United Auto Workers, long the most democratic and inventive of the major American labor organizations, all of this is a nightmare from which there is no awakening. If the union fights off the humongous cuts management wants, it will only be speeding up the day when the employer companies collapse. If it accedes to management's importunings, the companies will probably collapse anyway, given that they are both cursed with dunderheaded executives who have been out-thought and out-maneuvered by Japanese and Korean car-makers for years.
Don't look to the government. It used to be said that some companies are "too big to fail," meaning that the repercussions were too awful to allow. Under that rubric thirty years ago Chrysler was given federal help, which worked out well. Today DaimlerChrysler is German-owned and having the same high-labor-cost problems in both countries. The American division of DaimlerChrysler is another candidate for bankruptcy.
There will be no federal help this time. There is no money for it and, thanks to examples all around us, we now believe that a society that props up bankrupt, money-losing companies will soon be bankrupt itself. Keeping foreign competition out makes no sense, either, since the foreign competition is making its cars here in the United States.
When smokestack America first crumpled with the collapse of the steel industry a generation ago, the industry survived, redesigned itself and grew profitable again. Most of the workers and their communities did not recover.
Nor will they this time. Nor will we, for Delphi is a marker of a new America in which there is no collective security, in which the union will not make you strong, in which there is no government to give you shelter and in which you know you are alone.
Nicholas Von Hoffman is a Pulitzer Prize–losing author of thirteen books, including "Citizen Cohn," and a columnist for the New York Observer.
Reprinted with permission from The Nation