Wolfram
10-20-2005, 11:46 PM
This article appeared in Tuesday's edition of "Whiskey and Gunpowder."
It appears that corporate execs get a diamond-studded golden parachute, while the rest of the people are machine-gunned on theirway down.
The Oracle of Delphi must havespoken onhow toshed a great corporation's financial obligations!
P.
The Saga at Delphi
THE WRITING WAS on the wall last week when executives at Delphi
asked the United Auto Workers union for substantial concessions,
including a cut of more than two-thirds to wages and benefits,
according to a union official's letter sent to Delphi UAW workers.
Also included in the concession request was the elimination of a
costly program giving full pay to laid-off workers.
While that "offer" was in the works, Delphi improved severance
package for senior executives right before filing for bankruptcy:
"Auto supplier Delphi Corp. said Friday it has beefed up severance
packages for top executives in order to encourage them to stay on as
the company prepares for a major restructuring that could include
bankruptcy.
"In a filing with the U.S. Securities and Exchange Commission,
Delphi said 21 top executives will be eligible for 18 months of
severance pay and at least a portion of their bonus if Delphi
terminates their employment or they leave for 'good reason.'
Previously, severance packages were capped at 12 months.
"Delphi said it made the change after determining its severance
package for top executives wasn't competitive. The new agreement
doesn't apply to Delphi's Chairman and Chief Executive Officer
Robert S. Miller, a restructuring expert who joined the company in
July. Miller's base salary is $1.5 million."
This is simply unconscionable. Demanding 67% reductions in pay and
benefits while boosting the pay of top execs is disgusting. Yes, the
wage contracts at Delphi were not sustainable, but whose fault was
that? Did not management agree to those wages and benefits? Delphi
said it made the change after determining its severance package for
top executives wasn't competitive. Competitive? Competitive with
what?
Delphi execs make out like bandits with guaranteed pay and benefits,
and will no doubt be given massive numbers of shares of the new
company coming out of bankruptcy. That is the kicker to this lie.
Did those execs really need any more "sweetening" to stay on? What
risk is there now with guaranteed pay, a more competitive company,
and probable mass firing of workers to drastically reduce expenses?
There would have been far more risk for those execs to try and
weather this mess through. Had they done that, perhaps they would
have merited increased benefits. Once again, Corporate America
proves there is no limit to greed.
Do we need a Corporate America motto? Here are a few ideas:
"If you can get away with something, act fast before the opportunity
passes."
"Screw the workers, there's always a job for them at Wal-Mart."
"I need a new yacht more than my subordinates need their next meal."
Somehow none of those seems exactly right. I am open to suggestions.
As for mass firings, it seems the axes are ready to chop headcounts
according to this headline: "Delphi CEO Sees Major Job Cuts":
"Delphi Corp., the U.S. auto-parts supplier that filed for Chapter
11 bankruptcy protection Saturday, plans to shut down or sell off a
substantial part of its U.S. operations, the Wall Street Journal
reported Monday.
"Miller said Delphi's troubles would require the company to divest,
consolidate, or close 'a substantial segment' of its 45
manufacturing sites in the United States and Canada, which employ
49,000 workers.
"He said he also plans to renegotiate the contracts and retirement
plans of Delphi's 33,000 union workers and 12,000 retirees, the
paper reported.
"UAW President Ron Gettelfinger in a statement called the filing
a 'bitter pill' and criticized Delphi for sweetening the severance
packages of 21 top executives the day before seeking bankruptcy
protection."
Delphi going under is not exactly good news for GM. It seems that GM
may be liable for between $4 and $11 billion worth of Delphi
benefits.
Let's take a look at what one article is saying.
According to Reuters, "GM Shares Hit by Delphi Fallout":
"General Motors Corp. shares fell sharply on Monday after the
largest automaker warned the bankruptcy of its biggest parts
supplier, Delphi Corp., could cost GM as much as $12 billion.
"GM said the Delphi filing did not necessarily make the automaker
liable for post-retirement health-care and pension benefits for
employees at Delphi.
"But its range of exposure -- under benefit guarantees the automaker
made as part of the 1999 spinoff -- extends from potentially no
material impact to up to $11 billion, with amounts closer to the
midpoint more possible than either end, GM said.
"Citing fallout from the Delphi bankruptcy, Banc of America cut its
rating on GM to 'sell' from 'neutral' and cut its price target on GM
shares to $18 from $32.
"Banc of America also increased its estimate of the likelihood that
GM itself would file for bankruptcy to 30% from 10%.
"Standard & Poor's on Monday cut GM's debt ratings deeper into junk
status and said it may cut them again."
Stephen Roach at Morgan Stanly chimed in on the U.S. automotive mess
today in Pondering Delphi. Let's tune in:
"Delphi's bankruptcy is a big deal. It is emblematic of a new set of
pressures bearing down on the United States. The global rebalancing
framework that I continue to embrace suggests that the world's
growth and asset return dynamic has only just begun a major tilt
away from the United States and dollar-based assets. If that's the
case, America will have little to offer in a low-return world for
risk-averse and yield-hungry investors. Could Delphi be the long
awaited wake-up call that drives this realization home?
"The Delphi bankruptcy raises two key questions -- the first about
credit spreads. Liquidity-driven markets remain more that willing to
treat Delphi as largely an idiosyncratic risk that does not pose
broader credit problems for Corporate America. GM ripple effects may
well draw that presumption into question -- especially for credit
markets, where spreads remain historically tight. A second concern
pertains to the funding of legacy costs. This is a big deal for the
United States. Dick Berner tells me that the Pension Benefit
Guaranty Corporation puts the funding gap at $450 billion for single-
employer plans and another $150 billion for multi-employer plans --
to say nothing of approximately $1.5 trillion for state and local
government plans. Like all contingent liabilities, America and its
creditors have long viewed this as a distant obligation. Delphi
challenges that complacency, as do recent bankruptcy filings for
Delta and Northwest Airlines. That, in turn, raises the risks of
added fiscal funding strains on the U.S. government. For saving-
short America, those risks will only increase an already daunting
current-account financing problem...
It appears that corporate execs get a diamond-studded golden parachute, while the rest of the people are machine-gunned on theirway down.
The Oracle of Delphi must havespoken onhow toshed a great corporation's financial obligations!
P.
The Saga at Delphi
THE WRITING WAS on the wall last week when executives at Delphi
asked the United Auto Workers union for substantial concessions,
including a cut of more than two-thirds to wages and benefits,
according to a union official's letter sent to Delphi UAW workers.
Also included in the concession request was the elimination of a
costly program giving full pay to laid-off workers.
While that "offer" was in the works, Delphi improved severance
package for senior executives right before filing for bankruptcy:
"Auto supplier Delphi Corp. said Friday it has beefed up severance
packages for top executives in order to encourage them to stay on as
the company prepares for a major restructuring that could include
bankruptcy.
"In a filing with the U.S. Securities and Exchange Commission,
Delphi said 21 top executives will be eligible for 18 months of
severance pay and at least a portion of their bonus if Delphi
terminates their employment or they leave for 'good reason.'
Previously, severance packages were capped at 12 months.
"Delphi said it made the change after determining its severance
package for top executives wasn't competitive. The new agreement
doesn't apply to Delphi's Chairman and Chief Executive Officer
Robert S. Miller, a restructuring expert who joined the company in
July. Miller's base salary is $1.5 million."
This is simply unconscionable. Demanding 67% reductions in pay and
benefits while boosting the pay of top execs is disgusting. Yes, the
wage contracts at Delphi were not sustainable, but whose fault was
that? Did not management agree to those wages and benefits? Delphi
said it made the change after determining its severance package for
top executives wasn't competitive. Competitive? Competitive with
what?
Delphi execs make out like bandits with guaranteed pay and benefits,
and will no doubt be given massive numbers of shares of the new
company coming out of bankruptcy. That is the kicker to this lie.
Did those execs really need any more "sweetening" to stay on? What
risk is there now with guaranteed pay, a more competitive company,
and probable mass firing of workers to drastically reduce expenses?
There would have been far more risk for those execs to try and
weather this mess through. Had they done that, perhaps they would
have merited increased benefits. Once again, Corporate America
proves there is no limit to greed.
Do we need a Corporate America motto? Here are a few ideas:
"If you can get away with something, act fast before the opportunity
passes."
"Screw the workers, there's always a job for them at Wal-Mart."
"I need a new yacht more than my subordinates need their next meal."
Somehow none of those seems exactly right. I am open to suggestions.
As for mass firings, it seems the axes are ready to chop headcounts
according to this headline: "Delphi CEO Sees Major Job Cuts":
"Delphi Corp., the U.S. auto-parts supplier that filed for Chapter
11 bankruptcy protection Saturday, plans to shut down or sell off a
substantial part of its U.S. operations, the Wall Street Journal
reported Monday.
"Miller said Delphi's troubles would require the company to divest,
consolidate, or close 'a substantial segment' of its 45
manufacturing sites in the United States and Canada, which employ
49,000 workers.
"He said he also plans to renegotiate the contracts and retirement
plans of Delphi's 33,000 union workers and 12,000 retirees, the
paper reported.
"UAW President Ron Gettelfinger in a statement called the filing
a 'bitter pill' and criticized Delphi for sweetening the severance
packages of 21 top executives the day before seeking bankruptcy
protection."
Delphi going under is not exactly good news for GM. It seems that GM
may be liable for between $4 and $11 billion worth of Delphi
benefits.
Let's take a look at what one article is saying.
According to Reuters, "GM Shares Hit by Delphi Fallout":
"General Motors Corp. shares fell sharply on Monday after the
largest automaker warned the bankruptcy of its biggest parts
supplier, Delphi Corp., could cost GM as much as $12 billion.
"GM said the Delphi filing did not necessarily make the automaker
liable for post-retirement health-care and pension benefits for
employees at Delphi.
"But its range of exposure -- under benefit guarantees the automaker
made as part of the 1999 spinoff -- extends from potentially no
material impact to up to $11 billion, with amounts closer to the
midpoint more possible than either end, GM said.
"Citing fallout from the Delphi bankruptcy, Banc of America cut its
rating on GM to 'sell' from 'neutral' and cut its price target on GM
shares to $18 from $32.
"Banc of America also increased its estimate of the likelihood that
GM itself would file for bankruptcy to 30% from 10%.
"Standard & Poor's on Monday cut GM's debt ratings deeper into junk
status and said it may cut them again."
Stephen Roach at Morgan Stanly chimed in on the U.S. automotive mess
today in Pondering Delphi. Let's tune in:
"Delphi's bankruptcy is a big deal. It is emblematic of a new set of
pressures bearing down on the United States. The global rebalancing
framework that I continue to embrace suggests that the world's
growth and asset return dynamic has only just begun a major tilt
away from the United States and dollar-based assets. If that's the
case, America will have little to offer in a low-return world for
risk-averse and yield-hungry investors. Could Delphi be the long
awaited wake-up call that drives this realization home?
"The Delphi bankruptcy raises two key questions -- the first about
credit spreads. Liquidity-driven markets remain more that willing to
treat Delphi as largely an idiosyncratic risk that does not pose
broader credit problems for Corporate America. GM ripple effects may
well draw that presumption into question -- especially for credit
markets, where spreads remain historically tight. A second concern
pertains to the funding of legacy costs. This is a big deal for the
United States. Dick Berner tells me that the Pension Benefit
Guaranty Corporation puts the funding gap at $450 billion for single-
employer plans and another $150 billion for multi-employer plans --
to say nothing of approximately $1.5 trillion for state and local
government plans. Like all contingent liabilities, America and its
creditors have long viewed this as a distant obligation. Delphi
challenges that complacency, as do recent bankruptcy filings for
Delta and Northwest Airlines. That, in turn, raises the risks of
added fiscal funding strains on the U.S. government. For saving-
short America, those risks will only increase an already daunting
current-account financing problem...