Chapter 11? But I haven't even finished Chapter 10 yet!

So Delphi Auto Parts has filed for Chapter 11 protection and I think the situation is interesting because it illustrates several defining issues of our day. The relationship between Delphi and GM is obviously an important one. For those who don’t know, Delphi is the largest US auto parts supplier, providing General Motors with most of its automotive systems, components and parts and GM is Delphi’s largest customer. (Correct me if I’m wrong, here).

One of the first issues that came to mind is the matter of fuel efficiency and the competition between America’s Big-Three automakers and the imports (mostly Japan). It took forever for Detroit to fall in line with the C.A.F.E. (fuel economy) standards while import car makers were, and remain, way ahead of the game. Once the industry-wide fuel standards were met in the late 1980s, Detroit auto-makers became complacent and continued making the gluttonous, over-thirsty vehicles they’re still known for. Showing constant insight (or perhaps hindsight, considering Japan’s own oil crisis, circa WWII), import auto makers have been making high-quality, fuel economic vehicles which have sold consistently well throughout the SUV craze of the 90s and are selling even more units as they spearhead the hybrid vehicle craze that appears to be comin’-round-the-mountain. Case in point: GM’s largest auto parts supplier is on its last legs, GM stock dropped 10%, and GM is poised to be the first of the Big Three to file for Chapter 11. Meanwhile, Honda and Toyota are primed to build new plants in Ontario. Reason: they can barely keep up with consumer demand. Does that tell you something?
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Now I realize the issue goes deeper than this. GM spun Delphi into an independent company in 1999, with an agreement that GM would assume Delphi’s benefit obligations, should Delphi file for Chapter 11. Well, now that Delphi is sitting on the edge of financial ruin, GM may have to take up the cause of paying annuities for the pensions of a growing number of people who—God bless ‘em—are lingering on into their 90s and higher. With life expectancy escalating, pensions are becoming overhanging burdens and the only chance of escape for companies like GM (with its once generous benefits program that set the bar for other industries) is to declare Chapter 11. It’s not so surprising that GM is at the front of the queue to establish national pension programs and bail its ass out.

While private corporations are different than World Governments, I think this is but one consequence of a growing trend towards short-term policy to appease voters and satisfy immediate, temporary financial needs. Like our major governments, GM is thinking about shareholders today, instead of the benefits of long-term strategies for tomorrow. And my point to all this: one of the weaknesses inherent to democracy is its parochial outlook; a consequence of serving 6 billion people who are waiting for an answer to tomorrow’s problems, today.

This was supposed to be a short post. Maybe you thought today’s topic was boring. If so, sorry.