Sunday, October 30, 2005

Tim Bath / Kokomo Tribune The staff works in a clean room at Delphi's tech center in Kokomo, Ind. In the past decade, jobs there have fallen from 10,000 to 2,300 hourly and 3,200 salaried, and some engineers fear further losses.

Delphi rattles salaried ranks

Bankruptcy heightens job, pension uncertainties of engineers pushed to do more as outsourcing grows.

By Louis Aguilar / The Detroit News

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KOKOMO, Ind. -- David Sedam had just taken the pills that help lower his blood pressure and soothe the frayed lining of his stomach when he heard Delphi Corp. filed for Chapter 11 bankruptcy protection.

For the first time since retiring in July after 32 years at the Delphi Electronics & Safety division in this north-central Indiana town, the engineer felt his gut churn and his temperature rise -- sensations he remembered well from his 10-hour days working as a manufacturing tech team leader.

"Who do you get angry at?" said the 53-year-old Kokomo resident. "Who do you get straight answers from? What the hell is going to happen to my pension and this town?"

Fear, angst and helplessness run deep among Delphi's 16,000 white-collar employees and engineers in Kokomo and the company's major U.S. hubs in Brighton and Troy; Lockport, N.Y.; and Dayton and Vandalia, Ohio.

As Delphi battles the United Auto Workers and other unions to lower pay and benefits, the fate of the parts maker's salaried workers has been nearly overlooked.

Delphi Chairman and CEO Robert S. "Steve" Miller said Friday he does not expect pay cuts for salaried workers, but he wouldn't promise every U.S. engineer will keep their job.

"I'm not about to shut down the tech centers in the U.S.," Miller said during an interview in Washington. "We'll continue to have a need for them. But the growth is in other locations (overseas), because that's where the market is expanding rapidly."

Angst has been building

At Delphi Electronics & Safety's Kokomo tech center, engineers and software designers say the bankruptcy is only the latest trauma.

Pressure has mounted over the years to adopt Japanese-style management practices and handle an increasingly complex workload.

The engineering ranks here have dwindled as Delphi high-tech centers sprouted up in outsourcing capitals such as Bangalore, India; Krakow, Poland; and Shanghai.

Workers, most of whom asked that their names not be published, pointed to a statement Miller made earlier this month: "As we shrink our business and become more productive, we might have fewer salaried workers going forward."

Within minutes of its online publication, the statement spread via private e-mails throughout Delphi's engineering and salaried ranks in the United States.

Delphi intends to review salaried staffing levels in the fourth quarter, said Delphi spokeswoman Claudia Baucus.

Under its bankruptcy reorganization, the supplier plans to sell, consolidate and shut many of its U.S. plants, a move that will require fewer manufacturing engineers. Since separating from General Motors Corp. in 1999, Delphi has steadily moved engineering resources to Europe and Asia in an effort to win new business with foreign firms.

Delphi Electronics & Safety's worldwide staff has been stable at around 30,000 for a decade, but the number of workers in Kokomo has dropped from more than 10,000 in the late 1990s to 2,300 hourly and 3,200 salaried workers today.

Some engineers fear the job losses will accelerate under Delphi's bankruptcy.

"I don't know many engineers and designers who have felt in control of their fates for quite some time," Sedam said.

High-tech history

Sedam is among the scores of Kokomo engineers who have worked on the cutting edge of auto technology for decades.

Elwood Haynes built the first mass-produced automobile here in 1898. In 1938, Kokomo engineers invented the first push-button car radio at the former Delco Division of GM, which eventually evolved into Delphi Electronics & Safety.

The first transistor car radio was invented here, and innovations in satellite radio continue today at Delphi Electronics. Delphi is Kokomo's second-largest employer, behind DaimlerChrysler AG.

As a manufacturing tech team leader, Sedam, like many Kokomo engineers and designers, had extensive international experience, often traveling to Mexico and Europe.

Filing seen as opening

That history of innovation is one reason some local boosters say Delphi's bankruptcy is an opportunity.

"Let's make the case Kokomo is the natural home of as much and maybe more of Delphi as it has been historically," Indiana Gov. Mitch Daniels said shortly after Delphi filed for Chapter 11 protection from creditors on Oct. 8. Delphi Electronics & Safety division is a profitable part of the corporation and the core of its global business, Daniels said.

While Delphi often has praised its Kokomo work force for producing leading-edge, high-tech safety and electronics components, many engineers and recent retirees remain skeptical.

"People stopped believing vague promises at least five years ago," said retired engineer Charles Loftis.

The day of the bankruptcy announcement, several engineers parsed the company's press release for signs of their fate. Many sent e-mails highlighting this statement: "Delphi's non-U.S. subsidiaries in the 39 countries outside the United States were not included in the filing ... and will not be subject to Chapter 11 ..."

Three days after the bankruptcy, Delphi announced plans to invest $10 million to expand its development center in Bangalore, where employment has grown from 35 in 2000 to 360 engineers today. The news prompted another wave of private e-mail exchanges by U.S. engineers.

Jeffrey Owens, president of Delphi Electronics & Safety, told Wards Auto World this summer that Kokomo engineers frequently ask about job security as Delphi steps up sourcing from Bangalore.

He explained that the company simply cannot serve the booming overseas markets from Kokomo.

"We've learned painfully in the past, if you try to do it all here (in Kokomo), we will fall far short of our customers' expectations," he said.

Analysts say Delphi workers may face more competition from lower-cost domestic companies than overseas workers.

"Kokomo makes the high-value kind of technology that not everybody can do," said David Cole, chairman of the Center for Automotive Research in Ann Arbor. "The competition there is not China or Bangalore. The competition in many respects is the supplier down the street, whose legacy costs are far less than Delphi's."

Delphi engineers say their insecurity and stress began to escalate about five years ago with the rise of constant training sessions in Japanese management practices such as lean manufacturing. The new methods require more rigorous number crunching and attention to detail than previous approaches, Sedam said. His trips overseas became more frequent and his days longer, he said.

Staff levels continually shrank. Five years ago, Sedam worked with a team of 11. When he retired this year, there were six. Many left because of the heavy workload and haven't been replaced, he said.

Sedam said he just "lost it one day" during a phone call with a Delphi manager in Milwaukee. "I knew then I had to walk away. I was never seeing my family. My blood pressure was so high that I was certain to have a heart attack, and my stomach was killing me," he said.

Like many retirees, Sedam wonders if he can count on his pension. A few years ago, he bought $5,000 worth of Delphi stock at $17 a share that is now virtually worthless. His 401(k) account is also loaded with Delphi stock. And his $2,400 monthly pension check may be threatened if Delphi shifts its pension plan to the federal government.

Few Delphi workers feel secure knowing their fate may be in the hands of a federal bankruptcy judge in New York.

"The only thing (the judge) may know about Kokomo is the song," said Bob Hayes, a Delphi purchasing manager and president of the Kokomo City Council. Hayes was referring to the Beach Boys' "Kokomo," which, in fact, is not about this Indiana town.

"There will be a Delphi here after all is said and done," Hayes said. "The best we can do is concentrate on customer satisfaction as workers and, as a city, make sure that we can support them in any way we can."

Staff Writer Jeff Plungis contributed to this report. You can reach Louis Aguilar at (313) 222-2760 or laguilar@detnews.com.