Many of the major US airlines have or are being restructured through the Bankruptcy Courts as has Air Canada. Through this route they have been able to survive in a manner which they probably could not have achieved through the normal negotiation process among company/union/lender/investor .
Respecting Air Canada as an example (and the CAW being one of the unions involved), CBC reported that
Respecting Air Canada as an example (and the CAW being one of the unions involved), CBC reported that
- "Air Canada's employees paid a heavy price for the airline's financial woes. Thousands lost their jobs in difficult downsizing negotiations; those that remained had to take pay cuts.
Creditors had to settle for a fraction of the billions they were owed. And the airline's shareholders were left holding stock that became virtually worthless."
Is the same pattern going to take place in the auto industry with Delphi being the test case for the Big Three perhaps? Will Chapter 11 or restructuring under the Companies' Creditors Arrangement Act in Canada become the norm to get concessions that otherwise could never be achieved? ie either go along and make sacrificies or bankruptcy with plants closing and jobs lost forever
Here are excerpts from a story I found in Forbes magazine recently:
- "GM, Delphi, UAW Continue Negotiating
Delphi's recent actions against the United Auto Workers union has cast a long shadow over General Motors.
The UAW has vowed to strike if the bankruptcy court agrees with Delphi’s request to throw out its union contracts...
For now, the analyst says GM, Delphi and UAW will continue to negotiate. Delphi’s two motions with the bankruptcy court request the authority to reject U.S. labor agreements and unprofitable supply contracts with General Motors. Delphi has requested new contracts on nearly half of its annual North American purchase volume revenue from GM, worth about $6 billion.
The union is doubtless upset over plans for restructuring at Delphi, which would require cutting its global salaried workforce by 25%, closing nearly one-third of its manufacturing base and doing away with about 40% of its corporate officer positions, says Murphy. Delphi also says it can’t sustain current wages for its hourly workers and would have to decrease wages by 25% to $16.50."
Once the struggle with Delphi is over, and each side has a lot to win and lose so the battle will be hard fought, will that be the template to be applied in the auto industry?
Will Windsor workers see big pay and benefits cuts and accept them or will they strike and perhaps see plants closed down and moved to other locations? If wages are lowered and it appears that the power of the unions has been reduced will the new Domestics consider moving to Windsor? Can the local economy stand a reduction of 25% of wages and what will happen to those with large debts and mortages that were to be paid off by the higher wages?
There are many questions to ask and I do not have any of the answers. If a reader does have a comment or opinion to give, feel free to write and I will provide a forum for your views!
Will Windsor workers see big pay and benefits cuts and accept them or will they strike and perhaps see plants closed down and moved to other locations? If wages are lowered and it appears that the power of the unions has been reduced will the new Domestics consider moving to Windsor? Can the local economy stand a reduction of 25% of wages and what will happen to those with large debts and mortages that were to be paid off by the higher wages?
There are many questions to ask and I do not have any of the answers. If a reader does have a comment or opinion to give, feel free to write and I will provide a forum for your views!
2 comments:
Allenparkpete writes:
Of course the Delphi/UAW/GM situation will have an effect on Windsor and also many other places connected to the old domestic automakers and parts suppliers.
The business models that have run Detroit up to now are dangerously out of date and regardless of the terms of "corporate greed" or "greedy unions" or "arrogant executives", everyone involved has to think in global terms and that does include Windsor, Ontario. Coupled with the coming border ID card or requirement to show identification to get into or back into the United States regardless of citizenship, Windsor will get hit with a double whammy.
There is so much more to this and it will be interesting to hear other comments.
A reader writes:
"If someone is looking for a scapegoat on the GM, Ford and DCX issue look no further than union leadership and corporate leadership. The worker is not to blame. The union leadership held a gun to the head of each OEM (called pattern bargaining ... or in other words ... we will put you out of business and let your two competitors have the market unless you give us what we want ) and rather than call their bluff (can't blame them) the corporate leadership caved to union demands.
Both are to blame. These contracts, especially the pensions yet alone the wages, were never affordable and never should have been granted. Now they have to be partially taken away or else the entire system collapses.
Windsor has high exposure to the CAW so the City will be hit hard either with lost jobs ( 5K plus and growing ) or with reduced wages and benefits. Adam Smith and his invisible hand turns out to be more powerful than any union executive or OEM executive. Capital always wins.
If you are an investor you should short Windsor. It has nowhere to go but down and no political leadership to even admit there is a problem let alone try to proactively solve it. Maybe Sam Schwartz and Estrin will buy a house in Windsor and put some of their money back into the local economy."
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