Speaking of General Motors and Ford —

Delphi Corp., a division of General Motors Corp. until 1999, filed for bankruptcy on Saturday reported an article in today’s New York Times. The filing for Chapter 11 protection comes as the company is hurt by high wage and benefit costs inherited from former parent GM.

The Michigan-based company’s is the biggest bankruptcy filing in U.S. automotive history, according to Reuters’ coverage.

Delphi has lost $5.5 billion during these last six financial quarters. Yes, the company has struggled of late, posting net losses of $741 million in the first half of 2005 alone. It had sought financing from GM and sharp cuts in wages and benefits from the United Auto Workers union to restructure unprofitable U.S. operations.

In filing, Delphi, the nation’s largest auto supplier, is seeking to cut its 34,000 unionized workers’ pay by as much as two-thirds. While very strong labor unions in recent decades have been losing their foothold, Delphi’s largest labor union United Automobile Workers has continued its principle of offering significantly high wages and generous benefits, despite the fact that its membership has dwindled to half its size since the 1970s. This bankruptcy, as NYT points out, “will be a major test.”

The union, once on the offensive, could now find itself taking a defensive position.

Delphi union workers are quick to point out that, if their pay is cut to as little as $10 an hour — as is being discussed — then they couldn’t even afford the car parts to the cars they’re assembling.

Bill Wineland, a 49-year-old line worker at a Delphi plant in Flint, Mich., told NYT:
“Who’s going to afford to buy these cars? Nobody making $10 or $12 an hour can afford a $30,000 automobile,” he said. “Henry Ford said a long, long time ago that people should have enough money to buy my product. Everybody thought that was crazy, but he made it work.”

(Random thought: Has any of this blog’s readers seen the Michael Moore documentary, Roger & Me, about the closure of GM’s plant in Flint, Michigan? Check it out — for verbal ammunition against conservatives OR liberals, whichever your cinematic perception/political inclination.)

“It is a crossroads,” Gary N. Chaison, a professor of industrial relations at Clark University in Worcester, Mass., notes in the article. “These were the aristocrats of labor, and now they’re in the position that their jobs are going to become lower-wage manufacturing jobs, as if they were producing hairdryers.”

As aforementioned, Delphi workers have been privy to enviable wages and benefits; however, such enjoyment will very likely be “harshly recalibrated to account for global competition,” and more of the company’s work is predicted to be shipped abroad. According to the NYT article, “…the cuts that have swept through domestic auto suppliers — several others are already bankrupt — are seen as a likely prelude to changes that will eventually reach GM, Ford and Chrysler, as they have swept through other old-line American industries struggling to compete globally.”

A Morgan Stanley analyst, however, told NYT that he “did not see the Big Three necessarily coming to the same crossroad as their domestic suppliers” because, although the Big Three and domestic suppliers both share intense competitive pressures, those pressures are not the same.

CEO Steve Miller told Reuters during the weekend to expect a significant reduction in U.S. employment and manufacturing operations, including dropping 4,000 idle UAW workers the company pays under its contract, and others as a reduction in operations makes them unnecessary. The company plans to “emerge from bankruptcy in early to mid-2007 after substantially cutting its U.S. manufacturing operations, and modifying labor agreements to reduce wages and benefits.”

NYT notes: “The Delphi that emerges from bankruptcy will have a smaller, poorer work force. Currently, Delphi’s American workers make about $65 to $70 an hour including benefits, more than 10 times, at least, the compensation of workers doing similar jobs in Mexico and China. Delphi wants trims that would take that below $20 an hour, in part by cutting wages to $10 to $12 an hour from $26 to $30.”

The company, according to MSNBC, plans to submit written proposed contract changes to the unions on or before Oct. 21.