Burning the Furniture; Steve Miller

By Naughton, Keith | Newsweek International, October 24, 2005 | Go to article overview

Burning the Furniture; Steve Miller


Naughton, Keith, Newsweek International


Byline: Keith Naughton

Steve Miller, CEO of newly bankrupt U.S. car-parts maker Delphi Corp., has always known how to cut the tension in difficult situations. Last month, with Delphi in feverish (and ultimately fruitless) negotiations for a bailout from General Motors, Miller found himself sitting beside GM CEO Rick Wagoner at an executive confab in Washington. Miller's BlackBerry buzzed. It was a flaming e-mail from an employee. "You are a rapist and a pillager and a thief of the working man's rights," it read, "and may you rot in hell." Miller showed it to Wagoner, saying: "Hey Rick, this one's for you."

His gallows humor aside, what Miller has to say is no laughing matter. The corporate fireman behind bankruptcies at Bethlehem Steel and United Airlines is loudly proclaiming an uncomfortable truth: America's industrial giants are collapsing under the weight of pension and health-care costs. Spun off from GM in 1999, Delphi is losing billions because its hourly labor costs are at least three times as high as its domestic rivals'. Then there's the flood of cheap offshore car parts that will likely lead Miller to close several factories making commodity parts. "Paying $65 an hour for someone mowing the lawn at one of our plants," he says, "is just not going to cut it." NEWSWEEK's Keith Naughton sat down with Miller to discuss the wider implications of Delphi's bankruptcy. Excerpts:

NAUGHTON: What does Delphi's bankruptcy mean for Detroit's automakers?

MILLER: This is very much a test case for what may happen across the whole U.S. auto industry. The labor-cost issues that have driven us to exhaust our financial resources are also very much on the minds of the traditional Big Three manufacturers here in Detroit. At General Motors, they basically have declared they can't take it anymore; that's why they have been so focused on health care. This is a prelude to what's coming in 2007 contract talks with the United Auto Workers.

How much of a problem are health-care and pension costs for Detroit?

They have roughly $2,500 per car of labor-cost disadvantage with their foreign competitors. That's just not sustainable.

Could that bankrupt GM and Ford?

Oh, yes. If Ford and GM are unable to modify their labor contracts, then they are very much at risk of spiraling down into an ultimate bankruptcy.

How does this compare to Bethlehem Steel's bankruptcy?

What I saw at Bethlehem Steel was a company that for 20 years continued to "burn the furniture" by selling assets to keep feeding the ever-growing legacy liability instead of putting it back into the business. …

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