Howes: Decade on, Delphi oracle’s diagnosis vindicated
The CEO who personified the coming recapitalization of Detroit’s bellwether auto industry, the guy union leaders and fellow-traveling Democrats loved to hate because he had the audacity to tell truths better left unsaid, is running another auto supplier.
It’ll be 10 years next month that Robert “Steve” Miller and the directors of Delphi Corp. used an Oct. 8, 2005, conference call to decide to file Chapter 11 bankruptcy — the opening move in a systemic restructuring that radically changed each of Detroit’s automakers and made Delphi, the former General Motors Corp. parts unit, an American company in name only.
Now Miller, 73, is running International Automotive Components and preparing to sell shares in the sprawling parts maker to investors in an initial public offering. Good for him and the owners of the privately held supplier who tapped the peripatetic Mr. Fixit to do it again, sort of.
But the former Chrysler exec known alternatively as “The Turnaround Kid” (see his memoir) or the inspiration for “Miller’s Mowers” (ask United Auto Workers veterans in Lockport, New York, who bridled at his quip about paying union wages to cut the grass) is best known around here for the questions he called and the epic changes the answers delivered.
It was The Real Reckoning, not the comparatively mild precursor detailed by David Halberstam decades earlier. Miller’s message, wildly unpopular among labor and entrenched interests invested in the status quo, was simple: the industry is structured to lose money, destroy capital and alienate customers whose money fuels the machine.
Embracing that reality, as Miller and his successor, rival executives and union leaders eventually did, proved to be a watershed for an industry founded on the bedrock of post-war prosperity, rising expectations and enviable affluence. It could not — nor would not — continue indefinitely.
“Traditional employers with traditional defined-benefit labor contract arrangements here are going to be exposed to competition,” Miller told me in an interview the day Delphi filed Chapter 11 for its U.S. operations. “In steel, it was upstarts like Nucor and imports. In airlines, the low-cost carriers finally brought an end to the ability of the traditional carriers to afford their labor contracts.
“This company cannot compete if we do not have substantial changes to manufacturing footprints and our labor contracts,” he continued. “The debate is: What are the ways in which we can provide a softer landing for people who will be subjected to the change.”
The reaction was furious. From UAW President Ron Gettelfinger to then-Gov. Jennifer Granholm, Delphi’s move and what it augured for the future of the Detroit industry was seen as less a harbinger of the inevitable and more a muscular display of plutocrats run amok at the expense of working people and their communities.
Miller’s diagnosis of what ailed Detroit proved prophetic, witness the increasingly desperate cost-cutting across the industry from 2005; Ford Motor Co.’s recruitment of Alan Mulally in 2006 to lead its restructuring; the off-loading of union retiree health care costs in 2007 to a union-controlled trust; the federal bailouts of GM and Chrysler Group in 2008 and their bankruptcies in 2009.
All of it, and more, helped reshape an industry that today is more competitive, more financially healthy and better equipped to afford its employees and serve its customers. The soft landings sought by Miller and his successor, Rodney O’Neal, however, proved more elusive to engineer.
Delphi’s salaried retirees lost large chunks of their pensions, thanks to the Obama administration’s auto task force, a wrong still to be righted. The UAW was expunged from Delphi, and 97 percent of its 160,000 employees worldwide work outside the United States. The company — officially Delphi Automotive plc — now is based in the United Kingdom, not the Troy headquarters overlooking Interstate 75.
Delphi’s financial performance is another story, almost all of it positive. Its shares have nearly quadrupled since their initial public offering in 2011 at $22 a share. Revenue expanded by roughly $2 billion last year, totaling $17 billion. And the dividend is steadily rising, paying out substantially more than GM, its former parent company.
Still, grudges die hard in this town and the automotive culture rooted in confrontation, entitlement and blame-shifting. Being right, as the Turnaround Kid mostly was, won’t mollify his critics — or change the record of what happened and why.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays and can be found at http://detroitnews.com/staff/27151.
Catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.