News from the Tennessee Valley Opinion
FRIDAY, MARCH 24, 2006


Good or bad, free trade is culprit in Delphi woes

Free trade is most to blame for Delphi's woes.

Globalization may ultimately shift domestic resources into more profitable uses, benefiting workers and their employers, but Delphi employees are paying the cost of America's social experiment.

The news Wednesday that Delphi and its former parent, General Motors, are offering retirement incentives is in some respects a positive. Some of those employees nearing retirement can get out with $35,000 in their pocket. Others may have a shot at leaving the Tennessee Valley and returning to General Motors.

The depressing part is that a $35,000 buyout is even tempting. A few years back, Delphi workers were among the highest paid in the area. Giving up $25-per-hour jobs with excellent benefits for $35,000 would have been unthinkable.

The world is changing, though. The Delphi of today is bloated and aimless, finding itself the loser in competition with opponents who are mostly overseas. Its hardworking employees are staring at a future of turmoil. Except for those that manage to secure one of 5,000 spots at GM, the best they can hope for is a job at half their current pay and a gutted benefits package.

Who's to blame?

Some point at United AutoWorkers, which worked hard to keep Delphi wages and benefits high. Blaming UAW, though, is a bit like blaming the lawyer who wins his client's case. The U.S. labor system is designed around collective labor. Whatever the consequences, UAW was doing its job.

Some target GM, which spun off Delphi in 1999. From the perspective of 2006, that decision appears to have been destined for failure. Even in 1999, auto parts makers did not enjoy the high wages enjoyed by auto assemblers. But many of the same problems would have followed if GM had kept its parts production in-house. Either way, high paid workers were producing goods that others could produce at lower cost.

Some blame the U.S. healthcare system. Delphi said it pays its average employee about $50 an hour in non-wage benefits; much of that is in the form of health coverage. Our healthcare system is the envy of the world, though, and most agree that it should not solely benefit the affulent.

Many argue Delphi employees are paying for decades of poor management by overpaid executives at GM and Delphi. If GM and Delphi were the only companies struggling, the argument might be compelling. The truth is, though, that shareholders have every incentive to attract good management, and it is a rare U.S. manufacturer that is not struggling.

The root of the problem is one that has been the undoing of almost every manufacturer in the nation. As America's standard of living has blossomed, the gap between the wages of American workers and their foreign counterparts has widened. China, Mexico, India and other developing countries have near limitless access to low-wage employees. As hardworking as they are, American workers are not so productive they can outwork the 50 Chinese workers that feel lucky to share the wages of a single Limestone County worker.

Delphi's bankruptcy involves only its U.S. holdings because its overseas holdings are profitable. They are profitable because labor is cheap; because the state, not the employer provides healthcare; because environmental regulations are lax or nonexistent; and because injured workers can be fired, not supported through workers compensation.

The reduced trade barriers that President Clinton and President Bush championed — through NAFTA, CAFTA and dozens of bilateral agreements — are more to blame for Delphi's struggles than any other culprit.

Free-trade advocates explain that companies like Delphi are victims of the transition from economic isolation to globalization. That we lack the comparative advantage China enjoys in producing auto parts is not a bad thing, it just means we need to find enterprises in which we hold the comparative advantage.

The free traders may be right. It may be we are merely enduring the growing pains that will, eventually, leave our nation stronger and our workers better paid.

The jury is still out, but, as any Delphi worker here will tell you, the deliberations are mighty ugly.

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