Share this article

print logo

LOCAL PLANTS PUT IT INTO GEAR, AIM TO BE LEANER AND MORE COMPETITIVE

Up until Jan. 1, Ronald M. Pirtle was a rising star at General Motors Corp.

Holder of a Harvard MBA, Pirtle started at GM in 1972 and rose to the position of corporate vice president. But as the year began, the head of Delphi Harrison Thermal Systems in Lockport was out of GM.

Instead, he's president of Delphi Thermal and an officer of its newly independent parent company, Delphi Automotive Systems.

"We're stepping into a new chapter," Pirtle said.

The emergence of Delphi from under the GM wing isn't the region's only auto story in 1999 -- just the biggest.

Western New York plants will continue their drive to become leaner and more competitive in '99 without raising the ire of the United Auto Workers, which demonstrated last year that it remains capable of bringing an automaker to a standstill.

Auto suppliers on the Niagara Frontier will also roll out new products and developments that support the industry's approximately 15,000 local jobs. GM's engine plant in the Town of Tonawanda is vying for new products; Ford Motor Co.'s metal stamping plant in Hamburg is continuing a wrenching battle to reduce costs, and American Axle & Manufacturing Inc. is poised to transform itself into a publicly held company, raising more than $100 million.

But Delphi Thermal's first independent steps are likely to dominate the news from the region's auto industry, as its 6,100 local workers decide whether to stick with the fledgling company, transfer back to the world's largest automaker, or retire by Oct. 1 with their GM pension intact. Nearly one in three Delphi employees in the United States are eligible for retirement, according to the UAW.

"I look at this as a lifetime opportunity . . . to be able to start on the ground floor and make the company what we want it to be," Pirtle said.

For a new company, Pontiac, Mich.-based Delphi Automotive Systems already stands a few floors above ground level. With $30 billion in sales, it will be the equivalent of a Fortune 25 company when its independence is complete later this year. In addition to the radiators and air-conditioning equipment made by Delphi Thermal, the company's business units make chassis and electrical systems, brakes, air bags and lighting systems.

Delphi Thermal, which generates about 10 percent of Delphi Automotive's sales, has 12,000 employees at 19 sites and is already the largest supplier of auto radiators in North America. Its 6,100 employees at the headquarters and manufacturing complex in Lockport make it the region's largest private employer.

Last year, the site generated what Pirtle termed a solid performance. Sales were somewhat less than the previous year's $2.8 billion total, as expected for a year when the autoworkers strike shut down GM for eight weeks. The company wouldn't reveal how much less. Under the new regime, Delphi Thermal will report operating results combined with other business units.

The separation from GM brings opportunities, Pirtle said, as well as anxiety. Some GM competitors are already showing interest in doing business with Delphi Thermal as its distance from GM increases, he said. The company's goal is to garner at least half of sales from sources other than GM's North American operations by 2002. Currently, 34.5 percent of sales are from outside GM.

Employees will share in the company's fortunes through ownership of Delphi Automotive stock, 26 million shares of which are reserved as "founders' grants" for workers. The shares may be used as incentives to turn back a stampede of transfers back to GM.

"We're going to be looking at things such as founders' grants to have employees participate in ownership of our company," Pirtle said.

The business is likely to see more changes in 1999 than at any time since it was founded by Herbert Harrison in 1910 and was absorbed by GM eight years later. The Harrison name will get less and less emphasis, Pirtle said, and may eventually be dropped to emphasize the unit's thermal-related products.

As 1999 began, Delphi Automotive became a company separate from GM with its own employees and responsibility for its own plants. An initial stock sale in the first quarter will be followed by the distribution of the balance of Delphi stock to GM shareholders, will make the spinoff final sometime before 2000.

As Delphi Automotive raises $1.53 billion in new capital from the stock offering, Delphi Thermal plans to invest both in the United States and in growing operations in Europe and Asia, Pirtle said.

When the spinoff was announced in August at the end of the GM strike, the UAW growled. Now, union officials say they expect the separation to be bloodless.

"I can't say that (confrontation) is coming to an end," said Kevin Donovan, Buffalo-area director for the UAW. "But there's a realization that we're a partner in the business."

Donovan said he expects the UAW to obtain transfer and pension rights to protect Delphi workers who want to stay under GM's financial umbrella, which guarantees a monthly income of more than $2,000 to retirees with 30 years of service.

When GM sold American Axle in 1994, workers got a three-year window to transfer back to GM. A similar package at Delphi may be in the offing, Donovan said.

Such issues will probably be settled before the UAW sits down to negotiate its first contract with Delphi, Donovan said. The current agreement with GM expires Sept. 14. Still to be resolved is whether Delphi will mirror GM's average $22-an-hour wage and relatively rich benefit levels or seek the lower labor costs common at auto components makers.

Pirtle emphasized that cost reduction will be paramount for Delphi Thermal as it faces a 30 percent decrease in average market prices over the next five years. The competitive North American market is attracting producers from around the globe and the Lockport factory must compete with brand-new factories with the latest production technology.

"The best global suppliers are here. . . . They're building facilities in North America," Pirtle said.

The site will seek cost savings from every direction -- management, suppliers, tax base, worker's compensation -- as well as labor costs to make the necessary trims, he said.

Despite its separation from Delphi Thermal, General Motors will still have a big presence in Western New York. GM Powertrain's complex on River Road in Tonawanda is the automaker's largest engine plant.

The site will debut its L850 engine this year, the "world engine" destined for a Saturn sedan and future GM cars.

But the L850 alone won't keep the plant from shrinking, as GM redesigns its aging engine lineup.

The Tonawanda site is looking for one or two new engines to replace products that GM is expected to retire after 2000. Tonawanda Powertrain is considered to be in the running for a new V-8 powerplant and a straight-six engine, necessary to maintain its 4,100 job total.

In October, union workers approved "team manufacturing" methods for new products that come to the plant, a factor that should boost the site's chances, the UAW's Donovan said. Plants in Michigan and elsewhere are thought to be bidding for the new engines. The L850 already has team manufacturing approval, which reduces the number of workers necessary and allows them to cut across traditional union job classifications.

Other important automotive industry employers include:

Ford Motor Co.'s Buffalo Stamping Plant in Hamburg.

With the uneasy distinction as one of the company's highest-cost metal stamping sites, Ford Buffalo remains under the gun to control costs or lose business.

As 1999 began, Ford President Jacques Nasser pledged the company will cut $1 billion in costs -- an initiative that is likely to cause belt-tightening at every Ford facility, a spokesman said. The austerity move comes on top of a $2 billion cost savings achieved over the past four years.

"That's the sort of announcement that affects all parts of the company," spokesman William Collins said.

Some positive developments in 1998 should strengthen the factory's hand as it vies for new tasks.

At the end of 1997, the site won a 40 percent tax reduction from the Town of Hamburg, a savings of $18 million a year. Last fall, the state announced a $1.5 million grant to help the site renovate a 50-year-old rail line that delivers sheet steel and takes away the plant's stamped metal doors, panels and other body parts.

Ford itself plans to invest $50 million over five years at the site, keeping metal press equipment and assembly lines up to date.

The stamping plant's biggest new product in '98 was the fourth door for Ford's extended-cab F-150 pickup truck, a $13 million production line that will help offset work lost with the cancellation of the Thunderbird and Mercury Cougar in 1997.

American Axle & Manufacturing Inc.

The Detroit-based company set the wheels in motion to offer public stock last year. But the offering was delayed after the strike at GM and a subsequent plunge in the stock values of auto industry suppliers.

The strike took a $72 million bite out of profits, American Axle disclosed in Securities and Exchange Commission filings.

That didn't stop the company from pursing its global expansion plans or broadening its operations and markets beyond its namesake home territory.

American Axle began construction of a 280,000-square-foot axle factory in central Mexico in the spring, chiefly to supply GM's growing vehicle operations. The plant near Silao, Mexico will be running in August 2000, the company expects.

In October, American Axle announced a deal to buy Albion Automotive Ltd. in Glasgow, Scotland, a $130 million maker of medium-duty truck axles. A subsequent filing reveals that American Axle will pay $94 million for Albion, requiring a loosening of credit terms from its lenders.

The pending stock offering puts the company in a "quiet period" that bars the company from making press comments, a spokeswoman said.

But public filings reveal that the company has been selected to provide axles for GM's next-generation compact light trucks, likely preserving employment levels early the next century. Of AAM's 8,800 workers, about 2,700 are at its two area plants in Buffalo and Tonawanda.

There are no comments - be the first to comment