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Delphi - Another Canary In The Coalmine

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Shocking stuff, a few home truths about the size of pension liabilities, the reality of what needs to happen to wages to compete - yes we've been running in entirely the wrong direction to even consider wage freezes and the potenital for a swift knock on effect as GM takes back on Delphi's liaiblites.

Auto Supplier Delphi Files for Bankruptcy

http://www.nytimes.com/2005/10/08/business...artner=homepage

.....

When G.M. spun off Delphi in 1999, the automaker agreed to pay health-care and pension benefits for Delphi retirees in the event of a bankruptcy filing within eight years.

Financial analysts have projected that this provision could cost G.M. $6 billion at a time when it can ill afford more problems.

....

Delphi wanted workers to accept wages of $10 to $12 an hour, compared with the $26 to $30 an hour most make today. One union local pointed out to members in a letter last week that they would likely no longer be able to afford new cars with Delphi products if such wages were put in place, but it conceded that a better deal was not likely in bankruptcy court.

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Guest magnoliawalls

I wonder are GM and Ford really 'too big to fail'?

If either of them go under it will really dent US consumer confidence.

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They'll probably be protected like the US airlines.

Something nearing 50% of Americas airlines are in, is it Chapter 11 bankruptcy?

This allows US firms to trade when insolvent.

See WorldCom for a recent example.

Many US companies are effectively trading bankrupt while jobs are lost as European competitors dont have the same protection.

So you see, Ford and GM wont fail - they'll go into protective bankruptcy until debts are restructured (ie pension funds are shafted) and the shareholders get their money.

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Guest Riser

The US economy appears to be falling apart piece by piece, here is a human take on the news that Delphi is going under:

Shell-shocked workers fear for future - The Detroit News

.......On Saturday, when Delphi declared bankruptcy and suggested it will move many U.S. jobs like that of Parker's overseas, his future and that of thousands of others became a lot more cloudy.

"There used to be a future in working for the Big 3,"Parker said, shaking his head as he learned the news of his employer's bankruptcy. "Good jobs, a good life. I don't know if there's still a future in the auto industry."

..........At a barbershop near the plant, auto worker Marvin Turner, in the midst of his Saturday haircut, can see tough times ahead for the next generation in his hometown.

"That was their hope for the future," Turner said. "It was the third generation trying to get in there and have the dream that we have had -- middle-class."

"This isn't the first time for the people in Flint," said Barber Kelvin Green, shaking his head slowly. "There's a whole new group getting hit now -- people who invested in homes, with kids in college. Losing pensions, cutting people's pay in half. It's a nightmare." ...............

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Delphi are a tier 1 automotive supplier - of course they can't afford to pay a production line worker $30 an hour - nobody cares (expect the US Delphi workers) where the fuel pump or stater motor on their Ford or GM comes from.

But would I buy a Ford Focus if it was made in China and the same quality as one made in Western Europe ? Maybe, but Ford would be taking a massive gamble that the government would not punish them in some way via tarrifs, duties etc and be taking a far bigger gamble that it would simply turn customers away to the competiton - far easier for Ford to set up a plant in China and make Ford Focuses for the Chinese only

Take a higer spec car (A BMW) and here the argument is greater - no one would want to buy a Chinese made BMW without making BMW look a joke - people would then buy a Mercedes or a Saab beacuse price is less of an issue to a BMW buyer. BMW might choose to buy their starter motors from Delphi in China, but the car itself would have to be made in Germany or it wouldn't be a BMW in the mind of the buyer - snob factor.

Take this to the extreme and put yourself as a buyer for aircraft engines - you might be able to buy a Chinese made areo engine that was cheaper than a Rolls Royce, fit it on your planes and sell a cheaper plane to the customer, but this engine would have to be every bit as economical and safe as a Rolls Royce, take years and billions to develop and by the time it's ready, legislation will have moved on making it illegal to use (environmental pressures) - far better to keep on buying Rolls Royce engines made in Derby.

This means that yes, more manufacturing jobs will goto China, but I think that after the Delphi's of this world have got their strategies set out that will be the end of it - as I say, a Chinese made BMW ? No, a Chinese made Ford ? possibly but unlikely. A Chinese made run about ? Yes but I would'nt buy one and I guess most people reading this wouldn't either.

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A Chinese made run about ? Yes but I would'nt buy one and I guess most people reading this wouldn't either.

Its a bit like saying most people wont eat rats, there again most people that statement applies to will have a full stomach. :rolleyes:

I remember a conversation I had with a millionare builder circa 1993, he was commenting on a local private allergies clinic going bust. He commented "it's funny how people forget what allergies they have in a recession" :rolleyes:

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Delphi are a tier 1 automotive supplier - of course they can't afford to pay a production line worker $30 an hour - nobody cares (expect the US Delphi workers) where the fuel pump or stater motor on their Ford or GM comes from.

But would I buy a Ford Focus if it was made in China and the same quality as one made in Western Europe ? Maybe, but Ford would be taking a massive gamble that the government would not punish them in some way via tarrifs, duties etc and be taking a far bigger gamble that it would simply turn customers away to the competiton - far easier for Ford to set up a plant in China and make Ford Focuses for the Chinese only

Take a higer spec car (A BMW) and here the argument is greater - no one would want to buy a Chinese made BMW without making BMW look a joke - people would then buy a Mercedes or a Saab beacuse price is less of an issue to a BMW buyer. BMW might choose to buy their starter motors from Delphi in China, but the car itself would have to be made in Germany or it wouldn't be a BMW in the mind of the buyer - snob factor.

Take this to the extreme and put yourself as a buyer for aircraft engines - you might be able to buy a Chinese made areo engine that was cheaper than a Rolls Royce, fit it on your planes and sell a cheaper plane to the customer, but this engine would have to be every bit as economical and safe as a Rolls Royce, take years and billions to develop and by the time it's ready, legislation will have moved on making it illegal to use (environmental pressures) - far better to keep on buying Rolls Royce engines made in Derby.

This means that yes, more manufacturing jobs will goto China, but I think that after the Delphi's of this world have got their strategies set out that will be the end of it - as I say, a Chinese made BMW ? No, a Chinese made Ford ? possibly but unlikely. A Chinese made run about ? Yes but I would'nt buy one and I guess most people reading this wouldn't either.

Oh please.

I'm old enough to remember when some said most wouldn't ever buy a Japanese motorcycle or car. Try to buy a British motorcycle today.

Some BMWs here have been built in South Africa.

This laptop I'm using has "made in China" on a label on the base.

If RR decided to move everything to China, how would that be stopped?

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I believe Porsche are already ousourcing production of their cars.

There are assembly plants that specialise in building cars, so that new boxster may not even come from Stuttgart.

It won't surprise me at all if we soon have most of our cars built in China.

The Germans and co can keep their design and research facilities.

I still want to buy a BMW that has the engine designed by German engineers.

As long as the Chinese can build to the required tolerances, who cares where it's made?

The likes of BMW,Audi, VW etc can specialise in designing the best products, and leave the manufacturing to the increasing efficient (and ruthless) Chinese.

And as for the American auto makers?

At least they have the government to bail them out.

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This means that yes, more manufacturing jobs will goto China, but I think that after the Delphi's of this world have got their strategies set out that will be the end of it - as I say, a Chinese made BMW ? No, a Chinese made Ford ? possibly but unlikely. A Chinese made run about ? Yes but I would'nt buy one and I guess most people reading this wouldn't either.

sorry, but this is totally wrong IMHO

ford stopped making cars in the UK a few years ago - did anyone complain?

also what is more scary is that BMW already assembled in China. there was a bit on the channel 4 car website over a year ago when they sent a reporter to shanghai to test the (then) new BMW 7 series.

the journo said he could tell the difference between the european version + the chinese version.

;)

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Yup, GM will have to foot >$14billion in pension liabilities. There was trouble in August and their bonds were downgraded to junk, it seems the dismal SUV and truck sales over the last month have finally taken them down. Ford and GM's SUV and light truck sales have tanked, Americans have long since stopped buying cars from these two so their big ass guzzlers were the only things they were 'good' at.

Our petrol may be three or four times as expensive as the US but some of those trucks only do ~10mpgs, whilst a decent car hear will do 30-40mph (TDI?), it must be like living in the UK for them, poor buggers!

Edited by BuyingBear

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Ford stopped making cars for the UK in the UK a few years ago but they didn't move production to China (which would have been possible without any problem), they moved it to Euroland....they had the oppertunity to move it to China (knowing it would be cheaper) and didn't..I can't think of any car available today which is made in China or India - the only attempt to bring an Indian car onto the UK market was a complete and utter flop - the CityRover made by Tata.

The products I'm talking about here are the high value added products (not the bits and pieces outsourcing that Porche may well outsource to Timbukto) - the radiator for a BRITISH designed and built Triumph motorcycle rolling off the production line today might be made in China, but you can't get (and wouldn't want) a Chinese made Triumph bike would you ? - it's part of the heritage thing - you want a BRITISH bike, you want it made in BRITAIN.

The same goes for BMW's - you want to think that your expertly designed/engineered car has been put togther by Germans, otherwise the guy at the Golf club with his GERMAN made Merc has got one up on you (that kind of thinking) - think of this another way - a wine lover will confirm that Champagane only comes from Champagne in France - sparking wine from any other part of the world is simply sparkling wine.

I can think of loads of examples of the above - if the Malaysian made Perudo Nippa is £5K why aren't the supermini crowd all buying them ? They're not. they're all buying the Toyotas Yaris' and the Nissan Micras which are a good deal more expensive than the Peruda Nippa

If Toyota moved production from Sunderland to China they risk alienating their customers and it would mean the end of the line for what is the most efficient car plant in the WORLD - price is not the only reason for buying something.

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Delphi wanted workers to accept wages of $10 to $12 an hour, compared with the $26 to $30 an hour most make today. One union local pointed out to members in a letter last week that they would likely no longer be able to afford new cars with Delphi products if such wages were put in place, but it conceded that a better deal was not likely in bankruptcy court.

26 to 30 USD does sound high for manufacturing jobs.

They are in competition with people from China who earn far less. People in the West will have to learn to accept this, swallow their pride and take salaries that are were previously unthinkable.

The USA in particular has further to fall. In the UK few regular automotive component workers would earn equivalent to 26 USD.

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I can think of loads of examples of the above - if the Malaysian made Perudo Nippa is £5K why aren't the supermini crowd all buying them ? They're not. they're all buying the Toyotas Yaris' and the Nissan Micras which are a good deal more expensive than the Peruda Nippa

triumph make good bikes these days - i've got one! (a speed triple) but the main reason i wanted it was it had a triple cylinder engine and not because it was british - although it made a nice change to support the home industry. :)

triumph is a small niche manufacturer - they make 30,000 bikes a year. honda make a million.

if people wanted british bikes so much - then why did virtually the whole industry go bust in the 1970's? the reason? - their products then were basically rubbish.

the most competative market is in the 600 sports bikes and their inital offering flopped because the TT600 was not good enough - simple as that. the consumer doesn't really care where stuff comes from - if they are good then people will buy them.

likewise the perodua nippa - it is a rubbish car so no-one bought them.

my argument is that when presented with a quality product, the consumer will buy it as long as the price is right. BMW could simply manufacture more in china and bring them over here. rather than cut the price they can still charge the same and increase their margin hugely.

what i am saying is that the BMW made in china is the same quality as the one made in germany - this is the scary element of the whole picture.

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Oh please.

I'm old enough to remember when some said most wouldn't ever buy a Japanese motorcycle or car. Try to buy a British motorcycle today.

<fx> walks out to garage, notices "Triumph" badge on tank of motorcycle. Checks VIN plate on frame, especially the bit that says, "Made in Hinckley, UK"</fx>

Fast forward to lunchtime, and wanders down to large Triumph dealer to browse new bikes. Fast forward another couple of weeks to NEC Bike Show, where Triumph will have one of the stars of the show, that competes head on with the most competitive class of motorcycle, previously dominated by the Japanese, and according to advanced reviews, have a winner. Rewind to last years show when they beat one of the longterm stars of the Honda lineup according to magazine reviews.

Triumph restarted in the early 90's, and have shown you can make a competitive product, at a competitive price in the UK, with a UK workforce. They are still too small to compete head-on with the Japanese, but like the other main European m'cycle makers, BMW and Italians like Ducati, have a niche that they stick to. They have now reached a certain size, and are even starting to make bikes that compete in an open market with the best Japan can make. Although they have a retro range that trades shamelessly on their heritage, they also make bikes with as much technology as the Japanese. They were one of the first to adopt fuel injection into mainstream bikes for instance. The Japanese followed a couple of years later.

It helps that they're privately owned, and can therefore take a longterm view of things, instead of just trying for short-term gains. They even had to contend with half their factory burning down a few years ago. It's a pity that successful UK manufacturers like this don't get much credit - most people still don't know you can buy a brand new, UK manufactured, modern British motorcycle.

Although foreign owned, the Japanese car maker plants in the UK are among the most efficient operations for their parent companies, and produce vehicles of just as high quality now as those made in Japan. (My company does work for Toyota, so we have some info on this).

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So you don't buy things made in China?

While I have no doubt people will willingly buy Chinese *anything* for the right price, I do try to minimise what I buy with a 'Made in China' sticker these days. Nauseating stories like this...

http://www.guardian.co.uk/china/story/0,7369,1588595,00.html

...make me feel very uncomfortable, and this is just the tip of the iceberg.

It can be hard work finding anything *not* made in China these days though, especially when buying online. So it probably makes more real world sense to buy on price and use some of the money saved to contribute to groups like Amnesty International.

Andrew McP

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<fx> walks out to garage, notices "Triumph" badge on tank of motorcycle. Checks VIN plate on frame, especially the bit that says, "Made in Hinckley, UK"</fx>

Fast forward to lunchtime, and wanders down to large Triumph dealer to browse new bikes. Fast forward another couple of weeks to NEC Bike Show, where Triumph will have one of the stars of the show, that competes head on with the most competitive class of motorcycle, previously dominated by the Japanese, and according to advanced reviews, have a winner. Rewind to last years show when they beat one of the longterm stars of the Honda lineup according to magazine reviews.

Triumph restarted in the early 90's, and have shown you can make a competitive product, at a competitive price in the UK, with a UK workforce. They are still too small to compete head-on with the Japanese, but like the other main European m'cycle makers, BMW and Italians like Ducati, have a niche that they stick to. They have now reached a certain size, and are even starting to make bikes that compete in an open market with the best Japan can make. Although they have a retro range that trades shamelessly on their heritage, they also make bikes with as much technology as the Japanese. They were one of the first to adopt fuel injection into mainstream bikes for instance. The Japanese followed a couple of years later.

It helps that they're privately owned, and can therefore take a longterm view of things, instead of just trying for short-term gains. They even had to contend with half their factory burning down a few years ago. It's a pity that successful UK manufacturers like this don't get much credit - most people still don't know you can buy a brand new, UK manufactured, modern British motorcycle.

Although foreign owned, the Japanese car maker plants in the UK are among the most efficient operations for their parent companies, and produce vehicles of just as high quality now as those made in Japan. (My company does work for Toyota, so we have some info on this).

Oops, yes, sorry I posted in haste. Triumph, of course. Not an industry here though, compared with the Japanese one.

Think about Honda, started by one man after WW11, who fitted little engines to bicycles. 50 years later massive worldwide and in many fields.

We run 2 Japanese cars, 1 built in Japan, 1 built in UK. The Japanese built is better quality. Imho.

If a car I wanted, for the reasons I wanted it, was built in China it wouldn't bother me one iota.

I'm seeing the same arguments used today ref the Chinese as were used about the Japanese some 30 odd years ago and these arguments won't wash with me.

The Chinese just like the Japanese will learn quickly, produce their own engineers, designers etc. and obviously treat the World as their marketplace.

What is so interesting about China is that their progress in what might be called Capitalist endeavour is happening under the control of a self proclaimed Communist State. That somewhat flies in the face of the belief that you need some form of democracy for Capitalism to thrive.

Interesting times, watching and discussing the ebb and flow of the shifts in Human activity.

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Honda builds some Accords in China, and does export from there.

GM builds its Zafiras in Thailand (Thailand is the centre of Asian car industry, and now the world's largest producer of pick up trucks)

Many Mercs (M class) and BMW's are built in USA. Both also have plants in S Africa.

BMW X3 and Porche Boxter are both built by same outsourcer I think (Steyr-Puch, an Austrian firm)

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What is so interesting about China is that their progress in what might be called Capitalist endeavour is happening under the control of a self proclaimed Communist State. That somewhat flies in the face of the belief that you need some form of democracy for Capitalism to thrive.

Why would anyone think that democracy is required for capitalism? In a democracy the majority will almost always vote to loot the pockets of the capitalists, increase their wages beyond rational levels and impose pointless NIMBY-ist restrictions. I'm far from surprised that the Chinese are turning out to be much better at capitalism than 'democratic' America or Europe.

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Why would anyone think that democracy is required for capitalism? In a democracy the majority will almost always vote to loot the pockets of the capitalists, increase their wages beyond rational levels and impose pointless NIMBY-ist restrictions. I'm far from surprised that the Chinese are turning out to be much better at capitalism than 'democratic' America or Europe.

I take your point in the sense of Capitalism "red in toth and claw".

I was thinking of factors such as a system of contract law seen as "fair" and an "intellectual" climate that allowed innovation.

Perhaps the Chinese leadership will be able to accomodate the pressures from a population becoming more educated, wealthy and in contact with the rest of the world.

And still remain in power.

I'm sure this will be a challenge to them and only time will tell.

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I was thinking of factors such as a system of contract law seen as "fair"

True: there does seem to be a lot of corruption in China due to a lack of effective contract law. However, democracy is hardly going to help with that, since voters can vote to change contracts at any time through government force.

and an "intellectual" climate that allowed innovation.

China's lack of 'intellectual property' law encourages a heck of a lot more innovation than the straightjacket IP laws in the West. You hardly encourage innovation by using patents to keep competitors out of the market and divide it up between a few established players (who all cross-license their patents as they can't operate without them).

Perhaps the Chinese leadership will be able to accomodate the pressures from a population becoming more educated, wealthy and in contact with the rest of the world. And still remain in power.

Probably not: but for the time being they're far more effective than 'democratic' governments at creating economic growth. They haven't yet been crippled by high taxes and restrictive laws pushed by vested interests.

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True: there does seem to be a lot of corruption in China due to a lack of effective contract law. However, democracy is hardly going to help with that, since voters can vote to change contracts at any time through government force.

China's lack of 'intellectual property' law encourages a heck of a lot more innovation than the straightjacket IP laws in the West. You hardly encourage innovation by using patents to keep competitors out of the market and divide it up between a few established players (who all cross-license their patents as they can't operate without them).

Probably not: but for the time being they're far more effective than 'democratic' governments at creating economic growth. They haven't yet been crippled by high taxes and restrictive laws pushed by vested interests.

Yes, I don't think we're far apart in seeing the potential of China.

Their progress has been, to my mind, amazing. The timescales compared to what happened with Japan are, I think, shorter and I'm not convinced that all in the West truly appreciate this.

As I've said on here before, life, economics and power, all go in cycles. Birth through to death.

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Apple iPods are designed in the US, but made in China. Touch and use an iPod and you will agree it does not appear low quality simply because it is assembled in China. I don't see why the same can't apply to cars.

Edited by tonification

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