Tuesday, October 18, 2005

What we're doing to workers

I happened to be in the car today while the Diane Rehme Show was on and heard her interview the author of a new biography of Henry Ford. As I'm sure many of you know, Ford made the decision to pay his workers an unheard of $5 a day so that they could afford to buy the cars they made. His philosophy was that it made good business sense to create a consumer class.

Business today is going in the opposite direction. We are systematically destroying the middle class and I truly marvel at the shortsightedness of the CEOs that are making these decisions. When ordinary Americans are driven into destitution by low wages, who is going to buy the products that the corporations are manufacturing?

I want to share with you an article published in Newsday that explores this issue. It is by Marie Cocco and is entitled "Delphi deal foretells a very grim future". Here's some of what it says:

Time was that when a big company demanded pay cuts of 60 percent from more than 30,000 workers in 13 states, announced countless plant closings and put employees on notice that pensions and health benefits were about to be slashed, some sort of political outcry would erupt.

That time has passed.

If there is official outrage over the bankruptcy strategy of Delphi Corp., the largest American auto-parts manufacturer, it is imperceptible. Yes, Michigan Gov. Jennifer Granholm has said her piece. Yes, the press has reported on the bankruptcy - laying out the usual story of an old-line manufacturer finding it so much cheaper to produce its wares overseas that it now must force down wages here at home.

A few have seen fit to mention the exquisitely embroidered golden parachutes the company seeks to provide for 21 top executives who might, after all, downsize themselves out of their jobs and so deserve a soft landing. Still, the commentary congeals predictably around the idea that this is the fault of the United Auto Workers, a union that's been successful at winning pay packages that allow members to live the middle-class life.

"Unsustainable entitlement," one commentator called the UAW contracts. "Welfare," said another, as if heading for a factory before dawn to strap on safety goggles is the moral equivalent of a day spent dawdling in front of the TV.

For those who missed the brief news flash about this monumental bankruptcy, here's the outline: Delphi, once a subsidiary of General Motors, is losing money. The parts maker complains of U.S. wages that are too high to compete with labor from Mexico, China and its other offshore locales. It is hell-bent on "addressing" its "legacy issues." That's corporate-speak for cutting pensions and health benefits for retirees.

Delphi wants to slash its American production workers' wages from about $27 an hour to $10 or $12, and expects the UAW to go along. Otherwise, the company will throw the workers on the mercy of the bankruptcy court. Delphi may well dump its pension obligations on the government. This could leave retirees with drastically reduced checks and taxpayers holding the bag.

To execute these tasks, Delphi needs the very best corporate managers. So it wants to sweeten severance terms if they stay on for a while but then are let go involuntarily. After restructuring, Delphi needs managers to drive the sleek new corporate machine. So it seeks to create a separate bonus plan for about 600 executives, under which they could receive up to 250 percent of salary. President Rodney O'Neal is looking at a $2.7 million "cash opportunity," according to court documents filed this month. Vice chairman David Wohleen stands to gain $2.2 million. Chairman Steve Miller got his upfront, a $3 million signing bonus last July.

I'm sorry but that's just obscene.

The article concludes this way:

In the 20th, we built the most prosperous society ever. The accomplishment came through private striving and public policy. Behind the achievement was a shared belief in paying workers enough to create a consumer class, and raising children who would reach higher into the middle class. If there is a shared philosophy now, it seems to be that no corporate tactic is unacceptable.

It calls expensive health coverage a symptom of workers' greediness at home - but conveniently, a government-funded expense abroad, which allows Delphi and other global companies to produce cheaply overseas. It is a philosophy that says a pension for average workers is an unaffordable excess, but extra pay for executives is a business strategy.

If this is our philosophy for this new century, the era will create the sort of economic caste system we boasted of having overcome in the last.

Why is there no public outcry? The ethos of ruthless selfishness that pervades in our society today is very worrying. And this is what is truly unsustainable. What American business is going to learn soon enough is that it is killing the goose that laid the golden egg. When the American consumer is driven into destitution, American business will have no customers.

1 comment:

  1. Chiming in late, but I can't resist my favorite quote from a previous US president.
    "My father always said that businessmen are SOBs, but I never believed him until now."
    -- John F. Kennedy


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