By K.O. JACKSON, Kokomo Tribune business writer
With General Motors Corp. temporarily idling 13 plants in the U.S. and Mexico this summer, it's uncertain how the idling will affect GM's suppliers.
Delphi Corp. spokesman Lindsey Williams said it was "premature" to address how the work stoppage could affect the Troy, Mich.-based auto supplier because "GM hasn't formally told us what will happen so it's premature for me to speak on speculation on how it will affect us.
"What I can say is we have adjusted our schedule in the past to meet our customers' demands. That may be true here."
At the end of February 2009, Kokomo's Delphi Electronic & Safety employed 3,200 people, of which 2,050 are salaried employees and 1,150 are hourly.
In addition to announcing the plant shutdowns - including the Fort Wayne plant - GM released a statement Thursday claiming Delphi lenders rejected a deal that would have allowed Delphi to emerge from its 3 1/2 year bankruptcy protection, and that rejection is now a threat to the U.S. auto industry.
GM has appropriated $11 billion to separate from Delphi.
"More recently, in light of the adverse developments in the industry, at GM and at Delphi, GM has been in negotiations with Delphi and its lenders to arrive at solutions that would ensure GM's source of supply under fair and reasonable terms," the GM statement read. "While GM has proposed a potential solution that would allow for the successful and rapid resolution of Delphi's bankruptcy case, its lenders have rejected this proposal.
"Without the successful resolution of this dispute, it is General Motors' view that Delphi or its lenders could force GM into an uncontrolled shutdown, with severe negative consequences for the U.S. automotive industry."
Delphi, which was spun off of GM in 1999, now has until May to submit a new restructuring plan to its creditors. A bankruptcy hearing is scheduled for May 7 and creditors must approve it by May 8.
Regardless of how the financial aspect ends between Delphi and GM, some communities may still face significant financial ramification with GM temporarily closing its plants, said several automotive analysts.
The cities with plant closing won't be that bad off, said Jim Hossack a AutoPacific consultant.
"It's not great, but it's not that big of a problem for the local communities with plants. The UAW members will get 95 percent of their pay if the doors are open or closed," said Hossack, during a phone interview from his Southern California office.
"It's more time out on the boat and more vacation time for those employees. GM has plenty of stock available. They probably have between 125 to 130 days of vehicles available. If they were closing their doors forever, we would have a really serious problem, but most of these workers [where plants are located] are going to cash a check. That's a helluva deal."
But perhaps it's not that "helluva" of a deal for GM suppliers like Kokomo's Delphi and Loganport's Federal Mogul.
Dave Cole, chairman of the Ann Arbor-based Center for Automotive Research, said closing plants for any amount of time is "tough on suppliers. They are already on edge. This can be very hurtful. If they aren't making cars, then they aren't using [suppliers'] parts. One job at a supplier effects five other jobs in a community. That can be tough."
Others, like Dr. Jerry Conover, are left wondering whether workers will still have a job when GM reopens its plants.
Conover is the director of the Indiana Business Research Center at Indiana University's Kelley School of Business in Bloomington.
Besides long union strikes, he can't recall an example of a company having a shutdown as significant as GM's.
As a result, "the bad news may be when they come back to their job, the same number of people may not be there. It's all a ripple effect. It will affect suppliers as well as GM," said Conover.
"Suppliers like Delphi and cities like Kokomo will feel the repercussion from this. This could have a substantial effect. If GM needs less parts, suppliers will make less parts and that means less of a need for workers."
Dealing with debt, plant closings, and people not buying new cars, the automotive industry is getting more attention from many people who never paid much attention to it, said Cole.
"It is getting so much attention and people are becoming sensitive to it," said Cole. "The economic impact the industry has causes it to get attention. It is the most complex industry we have and the one with the highest value. There is nothing else as unique as it. What is going on with it now can help or hurt it, but what I am seeing now is hurt."