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An Industrial Town Stares Change in the Face
Woes of Auto Parts Maker Threaten Wages

By Sholnn Freeman
Washington Post Staff Writer
Saturday, November 12, 2005; A01

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.

Mondello, the Delphi worker, leaned toward the door with her young niece by her side. She lives just outside of Lockport — out in the country, where it’s a little quieter. Mondello, a working mother, was dressed in jeans and a sweater, hair cut to shoulder length. “I love my job,” she said. “I take pride in my work and my job. I know a lot of people there do.”

She said her standard of living has gone up drastically since she started at Delphi five years ago. This Christmas, she is taking her family to Arizona to visit her teenage son, the first time she’s been able to afford the trip. Her daughter gets a $1,500 scholarship from Delphi to attend Buffalo State College. Mondello has bought three cars since starting at the plant; the last one was her first new car. “I’ve never been able to buy a brand-new car, and I won’t if I only make $9 or $10 an hour,” she said.

Mondello is trying to remain calm about the future. It helps that she’s been through this before. From 1994 to 1999, she had a job making saw blades before the company closed up and moved to the South. She then worked as an assistant manager at a Yellow Goose convenience store. She wonders if she’ll lose her job in the reorganization. Right now, she’s trying to live by the upbeat motto “Life is too short to dwell on the bad things.”

A Heritage in Doubt

For nearly all of its history, Lockport’s fortunes have been heavily tied to America’s industrialization, brought to town when the Erie Canal opened in 1825. The canal was the country’s major infrastructure project of its era, forging trade links between the east and west by connecting the port of New York City to Chicago and the other ports of the Great Lakes.

Lockport gets its name from the canal locks near Main Street, which raise and lower boats along two 25-foot steps as they pass through the city. Industries came and went, some slowly dying out as businesses moved overseas or new technology made the old ways obsolete. Today, the Lockport section of the canal is a tourist attraction.

The Lockport auto parts plant goes back to 1910, and most people in town refer to it as “Harrison’s,” after Herbert Champion Harrison, who was one of the first to apply the assembly line system used to cheaply mass-produce cars to the process of making parts.

Today, the Lockport plant falls under Delphi’s thermal and interior systems division. Workers make radiators and condensers, vent and duct work that sits mostly underneath the dashboard. Delphi says 90 percent of the parts built at the plant go into GM-built vehicles. Local officials estimate that the facility pumps as much as $500 million into the Lockport area annually. Six hundred smaller companies in the region count on Delphi as a customer of their products.

Delphi was created in 1995 as the consolidated parts division of GM. The division was spun off into a stand-alone company in 1999. The deal was supposed to allow GM to refocus on designing and assembling cars and trucks. Delphi would be free to focus on making parts and pursuing contracts from other automakers. Delphi has struggled to make a profit, accumulating $5.5 billion in losses since 2000, $1.5 billion of which was in the first three quarters of this year.

Miller, the Delphi chief executive, says the labor costs that Delphi inherited at the time of its spinoff leave it at a substantial competitive disadvantage, particularly as more auto parts production moves overseas into countries where labor is cheap. In frank language, Miller has said workers can’t be blamed for pursuing the American dream. He said the companies have made promises of job security, health care and retirement pensions that they simply can no longer afford to pay. “All of us have been caught short by fast-changing economics,” he said.

In Lockport, the season of canal pleasure boaters is coming to a close. The lock keepers will soon drain the canal locks. Last week, Mondello was gearing up for another Saturday shift at the plant. At work, she sees no signs of GM or Delphi cutting back. GM is ratcheting up production for a new line of sport-utility vehicles, using parts built at the Lockport facility. The extra work on weekends makes Mondello and other workers skeptical of Delphi’s cry of insolvency. “There’s been no slowdown,” she said.

© 2005 The Washington Post Company