US carmakers at crossroads

• Productivity rates. While US factory productivity has improved, it still lags behind rivals in hours of work per vehicle.

Then there are the legacy costs. The more jobs US automakers cut, the more they become victims of their own storied past. A quarter century ago, GM employed a stunning 80,000 workers in Flint alone. Its factories remain local landmarks. Some appear big enough to allow every team in the NFL to play simultaneously behind their corrugated walls.

But now GM and Delphi, the partsmaker it spun off in 1999, employ fewer than 20,000 people here.

Where once GM had more than four workers for every pensioned retiree, that ratio is fast reversing. The company has more than 2.5 retirees for each of its 106,000 North American workers.

Last week, the company announced its goal to trim its ranks in North America by another 30,000 by 2008, including more cuts here in Flint.

Now healthcare and pension costs, for current workers as well as retirees, add more than $1,500 to the cost of each GM vehicle.

The generous promises of the past no longer look as affordable, with GM losing as much as $1,000 this year on every car it sells.

While GM has faced the steepest losses this year, its challenges are ones that Ford and DaimlerChrysler share, too. All will be pressing for union concessions on issues such as healthcare costs.

"The Japanese companies operating in the US are operating without any of these pension burdens and healthcare problems," says Peter Cappelli, a labor expert at the University of Pennsylvania's Wharton School.

Benefits now cost auto companies more than hourly wages for their UAW employees. Total compensation averages $65 an hour at Delphi and even higher at GM.

This fall, Delphi filed for bankruptcy protection, and bond ratings for GM and Ford have fallen into the "junk" (below investment grade) category.

With Wall Street investors pushing for profits and union workers trying to retain cherished benefits, finding answers won't be easy.

One answer, favored by many on the investor/management side, is to find ways to shed benefit obligations.

Already, in the steel and airline industries, worker pensions have been decimated in bankruptcy proceedings.

At Delphi, CEO Miller has threatened that the promise of pensions for UAW workers after 30 years of work may be frozen if other costs savings don't make the company profitable.

If union workers end up striking at Delphi if a deal isn't reached by January, the impact could shut down GM factories. So GM is trying to coax a deal between the factions, promising this week to raise the price it pays for Delphi parts.

Here in Flint, as workers stage a rally against big executive bonuses at Delphi, many say there's another key part of the answer: revising trade laws.

For too long, they say, "free trade" deals have proved devastating to American workers.

Looking out over a sea of signs and above the din of passing cars honking their support, local UAW official Steve Grandstaff puts it this way: "You could probably characterize it as a last-ditch effort to ask the government to step in and reconsider the trade laws."

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