Workers' Liberty

The US autoparts maker Delphi has gone to a judge to ask him to allow them to void their union contract, a process alowed in US law under Chapeter 11 Bankruptcy proceedings. Delphi used to be a part of GM, and it is still GM's largest parts supplier. For several months Delphi has been seeking to renegotiate with it sworkers to basically scrap their Health Insurance scheme, to cut pension provision, and to cut wages by around 60%. Not surprisaingly the workers have resisted. They have a strong card. If UAW members at Delphi strike GM will probably go bust, because it will not be able to produce cars without Delphi parts. For the last few weks Delphi, GM and the UAW have been negotiating to try to arrange a deal. Last week they agreed that some Delphi workers would be paid off to take redundancy, and some would go to work for GM. The problem is GM is virtually bankrupt too. It seems only a matter of time.

GM has been losing money on car production for years. Its main problem is that the biggest car makers rely on high volume sales with low mark-ups on the cars. But when there is significant overproduction the volume car makers get hit more than the lower volume higher mark-up producers. Both GM and Ford have suffered also because over several decades since the war when the US auto industry ruled the world workers in US plants were able to win high wages, and decent benefits, such as the pensions and health insurance benefits now under attack. The US private healthcare system is extremely bureuacratic, expensive and inefficient. In recent years an increase in people suing for medical malpractice has also increased the insurance that health professionals have to take out, and that has pushed healthcare costs even higher. That has been pased on as a big cost to US industry whose Health Insurance premium for its workers have soared. That has made US manufacturing businesses uncompetitive even aginst Europe, coming at a time when China, India and other Asian economies are becoming the economic powerhouses of the workld economy, it could not have been a worse time for the US to be hit by these rising costs.

Both Ford and GM have responded over recent years in the way you would expect oligopolistic suppliers to react. They tried to use all kinds of gimmicks to keep up flagging sales without cutting prices, they put pressure on suppliers to cut costs, and they bought up smaller producers. But Japanese car makers such as Toyota have continued to expand production - including in the US - and so the overproduction has continued. That is before China emerges as a major car producer as it is about to do. China is about to launch a family car on the market which has allthe features of an expensive model for around £5,000, and is producing a luxury car compatible with a mid range Mercedes which will sell for £20,000.

GM has responded by selling off the one profitable bit of its business its Finance and Mortgage business GMAC, and has been selling other business to stay liquid, most recently its stake in Isuzu. But despite that it continues to haemorage cash. Its credit rating was downgaded yet again last week, having been reduced to junk status last year.

Delphi's decision to go to court to void its union contract looks set to spark a strike by UAW members. It will probably then lead GM to go to court to decalre Chapter 11 bankruptcy and try to void its contracts too. It could be the beginning of a long dispute in the US auto industry. The outcome could determine whether US busineses are able to press through further cuts in workers pay and conditions particularly in relation to healthcare and pensions. Workers real wages have fallen every year for the last 20 years, yet wages for those at the top have risen. The share of profits in GDP over the last year has risen to the highest it has been since the 1960's. That should be the foundation on which US workers begin to demand a bigger share of the cake. The problem is that in the new competitive, globalised world US industry seems ill-equipped to concede.

Report here.

Delphi