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by Christopher Chantrill
October 18, 2005 at 4:11 am
FOR THOSE of you still transfixed by hurricanes and Supreme Court nominations, heres a more important issue: Who lost Delphi?
Dell Who? Of course. Delphi Corporation, the former parts division of General Motors, isnt exactly a household word. But Delphi filed for Chapter 11 bankruptcy on October 8, 2005. And that means that its workers could be facing wage cuts, and its retirees pension and health care benefit cuts.
The cuts could be substantial. We pay hourly workers three times the market rate; salaried staff are paid a market rate and execs are paid below market, said Delphi CEO Steve Miller. He proposes to cut hourly wages by 63 percent. United Auto Workers President Ron Gettelfinger (http://www.detnews.com/2005/autosinsider/0510/16/D01-349665.htm) responded by accusing Miller of using scare tactics.
How could Delphi have got into a position where it cant pay the pensions it promised? Who is to blame? Is it greedy management? Is it greedy unions? Is it the FASB? Is it Congress? Or is it all due to the inattention of President Bush? Its important to get out in front in the blame game because the Delphi bankruptcy could set a precedent for bigger bankruptcies coming down the road. Like General Motors.
When we get to the bankruptcy of General Motors even the sluggish minds of the mainstream media will sit up and take notice. It took an agonizing two days for them to decide that the mess of hurricane Katrina was all President Bushs fault. It is unlikely that they will take as long to come to a decision when GM goes broke. It is important to establish a narrative now so that when the great minds at the MSM grab for their ledes on Detroits Black Monday, the American people wont find themselves on the hook for the mother of all bailouts.
Who is to blame? Londons (http://www.economist.com/displaystory.cfm?story_id=5017138) Economist blames the managements of older manufacturing firms with (at least until recently) large workforces and unions strong enough to negotiate generous retirement benefits. The United Auto Workers demanded More and management gave it to them. Well, not quite. What management actually gave the workers was something rather less; they gave them a promise. They offered to pay them their benefits out of future earnings. Now it turns out that there arent going to be any earnings. Delphi lost $741 million on revenue of $13.9 billion in the first half of 2005.
What an outrage! How dare they renege on their promises! That is what the politician and the activist in each of us say. How could Detroit have made extravagant promises and then passed the bills off for the next generation to pay?
When a corporation creates a successful new product or innovates a business process and creates a new global best practice, it gets to enjoy extraordinary profits for a while until the rest of the world catches up. It gets to charge rent. Investors and speculators clamber aboard for the ride, and other rent seekersemployees organized into labor unionsalso demand their piece of the action.
The auto manufacturers of Detroit were the most productive in the world from the introduction of the Model T until the heyday of the magnificent land yachts of the 1960s. They spewed out cash in every direction: to investors, to managers, to government, and to organized labor. Then God created Toyota and the rent dried up.
In response, the automakers improved their products, eventually. But they did not reduce the promises and the rent payments first established when the Rocket V-8 and the Turbo-Hydromatic were the wonders of the world. For one thing, the United Auto Workers refused to let them.
Twenty-five years later, everyone is complaining about the mess. It seems that corporations everywhere are going into Chapter 11 bankruptcy, tanking their labor agreements, shuffling their pension obligations off onto the Pension Benefit Guaranty Corporation (PBGC), and, freed from their obligations, obtaining an unfair advantage over their competitors.
But theres another angle to the story. In the airline bankruptcies, the workers and shareholders have submitted to the Chapter 11 process rather meekly. The shareholders get wiped out; the pension beneficiaries get a haircut from the PBGC, the unions get their above-market wages thrown in the toilet, and we hardly hear a peep. Will the Delphi stakeholders agree to go under the knife so quietly? Well soon find out.
Imagine a nice smooth Delphi bankruptcy, with management blamed, shareholders wiped out, and the workers and retirees given a really close shave without bloody nicks and cuts. It could set the rules for the upcoming General Motors bankruptcy.
Meanwhile its time for Congress to get to work. It could stop corporations from making reckless promises to current employees about future benefits. Neither todays global best practice corporation nor its employees should assume that the rent will go on forever.
Buy his Road to the Middle Class.
[W]hen I asked a liberal longtime editor I know with a mainstream [publishing] house for a candid, shorthand version of the assumptions she and her colleagues make about conservatives, she didn't hesitate. Racist, sexist, homophobic, anti-choice fascists, she offered, smiling but meaning it.
Harry Stein, I Can't Believe I'm Sitting Next to a Republican
Families helped each other putting up homes and barns. Together, they built churches, schools, and common civic buildings. They collaborated to build roads and bridges. They took pride in being free persons, independent, and self-reliant; but the texture of their lives was cooperative and fraternal.
Michael Novak, The Spirit of Democratic Capitalism
[To make] of each individual member of the army a soldier who, in character, capability, and knowledge, is self-reliant, self-confident, dedicated, and joyful in taking responsibility [verantwortungsfreudig] as a man and a soldier. — Gen. Hans von Seeckt
MacGregor Knox, Williamson Murray, ed., The dynamics of military revolution, 1300-2050
For [the left] there is only the state and the individual, nothing in between. No family to rely on, no friend to depend on, no community to call on. No neighbourhood to grow in, no faith to share in, no charities to work in. No-one but the Minister, nowhere but Whitehall, no such thing as society - just them, and their laws, and their rules, and their arrogance.
David Cameron, Conference Speech 2008
Imagining that all order is the result of design, socialists
conclude that order must be improvable by better design of some superior mind.
F.A. Hayek, The Fatal Conceit
[Every] sacrifice is an act of impurity that pays for a prior act of greater impurity... without its participants having to suffer the full consequences incurred by its predecessor. The punishment is commuted in a process that strangely combines and finesses the deep contradiction between justice and mercy.
Frederick Turner, Beauty: The Value of Values
[The Axial Age] highlights the conception of a responsible self... [that] promise[s] man for the first time that he can understand the fundamental structure of reality and through salvation participate actively in it.
Robert N Bellah, "Religious Evolution", American Sociological Review, Vol. 29, No. 3.
But the only religions that have survived are those which support property and the family.
Thus the outlook for communism, which is both anti-property and anti-family, (and also anti-religion), is not promising.
F.A. Hayek, The Fatal Conceit
[T]he way to achieve a system of determining admission to the public schools on a nonracial basis,
Brown II, 349 U. S., at 300–301, is to stop assigning students on a racial basis. The way to stop
discrimination on the basis of race is to stop discriminating on the basis of race.
Roberts, C.J., Parents Involved in Community Schools vs. Seattle School District
A writer who says that there are no truths, or that all truth is merely relative, is asking you not to believe him. So dont.
Roger Scruton, Modern Philosophy
Paul Dirac: When I was talking with Lemaître about [the expanding universe] and feeling stimulated
by the grandeur of the picture that he has given us, I told him that
I thought cosmology was the branch of science that lies closest to religion.
However [Georges] Lemaître [Catholic priest, physicist, and
inventor of the Big Bang Theory] did not agree with me. After thinking it over he
suggested psychology as lying closest to religion.
John Farrell, The Creation Myth
Within Pentecostalism the injurious hierarchies of the wider world are abrogated and replaced by a single hierarchy of faith, grace, and the empowerments of the spirit... where groups gather on rafts to take them through the turbulence of the great journey from extensive rural networks to the mega-city and the nuclear family...
David Martin, On Secularization