The Delphi ‘Bankruptcy’: The Continuation of Class War by Other Means

The bankruptcy filing in October of last year by the Delphi Corporation, the giant auto-parts supplier spun off by General Motors in a 1999 public offering, sent a shock wave across the American labor movement. The slow grinding down of organized labor, and with it the standard of living of American workers, has been underway for several decades. This attack on the heavily unionized auto sector, however, indicates a new level of aggressiveness by employers. Coming as it did only a few months after the controversial breakaway from the AFL-CIO of several large affiliates to form the new Change to Win Coalition, the Delphi events seemed to confirm the argument by some in the new grouping that organized labor has to look to a new postindustrial economy in order to rebuild. This is no ordinary bankruptcy, however. Rather than pointing to an economy inevitably beyond manufacturing, it represents a strategic innovation intended to exploit the value still extant in our industrial economy. The entire labor movement must confront this important development.

Far from being a sudden event, the bankruptcy was carefully planned by Delphi’s senior managers and directors. Newly installed Delphi CEO Robert Stevens (“Steve”) Miller is executing a script well understood on Wall Street. Delphi’s bankruptcy strategy represents a new approach to the restructuring of American corporations that benefits senior corporate insiders and their financial backers on Wall Street at the expense of workers and a range of other corporate constituencies. As the company explained in October to investors and customers, the “reorganization is well financed, well planned and well organized.” Or, as Financial Times columnist John Gapper expressed it: “Organized labor, meet organized capital.”

For the moment, it appears that Delphi management has blinked first, withdrawing its early proposal for wage cuts of 60 percent from the six unions representing the Delphi work force. Nonetheless, the initial strong reaction to the bankruptcy is understandable. The events now unfolding at Delphi, as well as in a federal courtroom in New York City, deserve close analysis for what they reveal about emerging employer strategies and the future of American unions.

The Delphi Illusion

Delphi is, formally, an independent corporation that emerged out of a consolidation, and then sale of, the internal parts segments of GM. For many decades, the big auto corporations kept the production of many of their parts in house. This strategy of vertical integration made sense from a business standpoint, lowering costs by internalizing key sources of intellectual property and allowing the parent companies unfettered access to crucial supplies. It also helped these companies confront the power of craft workers, some organized in American Federation of Labor unions, in the early twentieth century. Of course, within a decade or so of the emergence of the big in...