A changing world catches up with Delphi, shocks Valley

For anyone who watched as Packard Electric grew to assume the role of Warren's pre-eminent employer, Saturday was an almost unbelievable day. Even those who were well aware of the company's downsizing in recent years were shocked.
A local company that first made light bulbs and transformers had made its mark as the world's best producer of automotive cable. Packard wires provided the spark for military vehicles that helped the United States win two world wars.
As a division of General Motors, with world headquarters in Warren, it did pioneer work in the automotive wiring industry, including innovations in printed circuits and fiber-optic cable.
In the 1960s, thousands would line up around the block on Dana Street for a Packard Electric hiring call.
It is difficult to reconcile those images with the announcement Saturday by Delphi Corp., the nation's largest automotive parts supplier and now-parent to Delphi Packard Electric Systems, that it was filing for bankruptcy.
Enormous impact
Though Delphi Packard's footprint in the Mahoning Valley is not what it once was -- at its peak of local employment, Packard had more than 13,000 employees in and around Warren -- its impact on the local economy remains enormous. The standard of living it continues to provide for thousands of area families is of incalculable value.
Delphi Chairman and CEO Robert S. Miller said Saturday that Delphi will continue to pay its 50,000 U.S. employees and suppliers and will ship its products on schedule. "We are not going to adversely affect our customers," he said. "Our people will get their paychecks and will still have their health benefits. Retirees will continue to get their checks. Any changes to that will be dealt with in an orderly way."
But changes are inevitable as Delphi restructures, with a goal of emerging from bankruptcy in 2007. Indeed, Delphi Corp. and Delphi Packard's situation today is a product of changes in the industry, changes in corporate America and changes in the world economy.
Packard is something of a microcosm. It was formed as a small local company 115 years ago by brothers James and William Packard and was acquired by General Motors in 1932. It made local headlines in 1955 when it moved production outside Warren for the first time -- to its North River Road plant in Bazetta Township.
That plant continued to grow, and Packard added satellite plants in the Mahoning Valley, but in 1973, it also opened two plants in Mississippi, signaling an attempt to find lower-cost labor outside Ohio. And five years later, it opened its first Mexican plant, to which it began moving its more labor-intensive work.
As Packard Electric outsourced work domestically and internationally in the 1980s and 1990s, it cut its costs. But it also found that quality sometimes suffered, and some work came back to Ohio.
But not enough. Throughout Delphi Corp., which provides a huge array of automotive products, there are 4,000 workers in job banks, where they report and receive full wages but do no work. About 10 percent of those job bank slots are in Warren.
No company can afford to pay even $10 an hour, much less $20 or $25, to employees who sit in a room reading, napping and talking to one another -- even if the talk is often about how they would rather be working than sitting.
But just as true, no nation can afford to send millions of jobs that pay middle-class wages to other countries year after year after year.
Driving the economy
The auto industry has been the lifeblood of the American economy for decades. The growth of the auto industry and the economy can fairly be traced back 80 years to Henry Ford, who instituted the $5- day on the theory that if he paid his workers enough to be able to afford his cars, other manufacturers would have to do likewise.
Ford's economic theory may have been interrupted by the Depression, but it was jump-started by the postwar boom. Good wages, along with investing in education and infrastructure, served the nation well for the half-century that led to U.S. prominence as a world power.
There have been necessary corrections.
Just as 13-week vacations caught up with steelworkers and the industry in which they were employed, job banks, health care costs and underfunded pensions are catching up with Delphi.
But inevitably, Henry Ford would tell you if he were here, outsourcing manufacturing jobs to foreign sweatshops will catch up with U.S. industry. Who will be left to buy the products that are assembled from those imported components?
The short-term solutions of cutting wages in half or sending jobs to China will have long-term consequences.
It may be time for some corrections across the board. Back in the 1950s, a chief executive who made 50 times what one of his workers made considered himself well-compensated (55, by the way, is the ratio between CEO and worker today in Japan.)
In 2004, the ratio of average CEO pay to the average pay of a production worker was 431-to-1. In 1990, CEOs made about 107 times more than the average worker. The average production worker who now makes $27,460 would be making $110,126 if his pay had risen as fast.
There are obviously any number of serious imbalances that have to be addressed.
As a nation, we once aspired to have a chicken in every pot. Today, that's not enough. But the idea that there should be three cars, a motorcycle and a boat in the driveway of everyone who punches a time clock isn't realistic. Any more than the idea that every CEO, even those who fail, is entitled to three houses, a yacht and a helicopter.