An Industrial Town Stares Change in the Face

Woes of Auto Parts Maker Threaten Wages

LOCKPORT, N.Y. -- Like a lot of people in town, Pam Mondello can feel the American dream slipping from her grasp.

Mondello, a 39-year-old plant worker, is worried about a big pay cut following the bankruptcy filing of Delphi Corp. last month. The auto parts supplier, as part of its reorganization, wants to slash the wages of thousands of factory workers around the country to as little as $9.50 an hour. Mondello, with bills to pay and three teenage children, is stunned that Delphi thinks it can get away with such a drastic cut.

"It's a slap in the face when they are paying $28 now," Mondello said. "We expect some kind of pay cut. But don't make us live in poverty."

To the 3,800 plant workers of Lockport, a class war is underway in the auto industry. Many of them believe Delphi's bankruptcy was orchestrated by auto executives to permanently smash the pay scale of working people. There is a sense here that nobody is holding the people in top management accountable.

"Corporate America has invested heavily overseas with money they should have put in my pension," said Michael Fredericks, a 53-year-old worker who started at the Lockport plant when he was 19. He is furious that his pay and pension are in jeopardy after working on the line for most of his 34 years at Delphi. "That's McDonald's and Burger King wages," he said of the new pay proposal. "It's not going to work. No one is going to do that. We fought too hard to get what we have."

The Delphi question isn't hanging over just Lockport. Delphi is the largest auto parts company in the United States. It employs more than 50,000 people in the United States and Canada. Even before it emerges from bankruptcy protection, Delphi is intensifying the national debate about health care policy, the waning might of the United States in heavy industry and the role of labor unions in the fast-moving global marketplace.

More immediately, if Delphi and its workers don't craft a deal on pay, pensions and benefits, a costly strike looms over the auto industry. The mere discussion of a Delphi strike is already hammering General Motors Corp., Delphi's largest customer, and adding to the worries of investors that GM will ultimately follow Delphi into bankruptcy. A Delphi strike could close down assembly lines at other manufacturers, including Ford Motor Co. and Toyota Motor Corp., two big Delphi customers.

Anderson Economic Group LLC, an auto industry consulting firm based in Lansing, Mich., has estimated the economic impact of Delphi's bankruptcy at $10 billion in 2007 alone, under the most optimistic assumptions. The figure includes lost income of Delphi workers and retirees and the impact to Delphi's suppliers. Taxpayers stand to lose close to $4.8 billion, including the possible assumption of Delphi's unfunded pension obligations. The consulting firm expects Delphi to cut at least 12,500 jobs. Any of its 31 plants could be closed as part of a reorganization.

The job losses and plant closings have set off alarms in political offices in Washington and around the country. Rep. Thomas M. Reynolds (R-N.Y.), who represents Lockport, has met with Labor Secretary Elaine L. Chao to talk about Delphi's plight. Last month, Delphi chief executive Robert S. Miller Jr. met with a group of congressmen to defend his reorganization strategy. He's also been called in to meet with Sen. Hillary Rodham Clinton (D-N.Y.). After the meeting, Clinton called on the Bush administration to convene a national summit on the crisis in the auto industry. Michigan Gov. Jennifer M. Granholm (D) and executives from Toyota and Ford have also sought a national summit to discuss policy initiatives that address the ills of the auto industry.

Industry executives say the problem is simple: Because of global competition, the U.S. automakers can no longer afford the generous wages and benefits that workers have won over decades of labor struggle and success at bargaining tables in Detroit. To reduce costs, auto parts companies have sped up efforts to scale back operations in the United States and Western Europe while expanding in Mexico, Honduras, the Philippines, India, Thailand, China and Eastern European countries.

'I Take Pride in My Work'

Delphi workers in Lockport are represented by United Auto Workers Local 686. The union hall, a redbrick schoolhouse that dates to the 1890s, is a major center of activity in the community of 22,000. On a recent Friday evening, a charity group that supports mentally ill adults held an auction upstairs in the hall. In the restaurant downstairs, Delphi workers stood around the bar and relaxed at tables, enjoying the hall's regular Friday night fish fry. Outside on the hall's front steps, people were enjoying the air, mingling in clusters. Some were from the union. Others had come by for the auction.

The attendees of the auction explained that Lockport is a place where there are slim pickings for employment and that decent jobs pay less than half of what Delphi workers are getting. "They make too much money," one of them whispered out of earshot of the Delphi workers hanging around the other end of the steps.