Delphi's move puts the retirement pensions of its 50,000 U.S. employees and 16,000 retirees at risk and worsens the eroding position of its chief customer, General Motors, which announced a $1.6 billion third quarter loss Monday. GM is contractually obligated to pay thousands of Delphi workers a portion of any benefits they might lose in bankruptcy, a bill that could run as high as $11 billion. One immediate reason for Delphi's filing was to forestall a $1 billion payment it was required to make to its pension programs in January. Miller blames the defined pension benefit, which he calls an "anachronism," for his company's downfall and points to the downward wage pressure exerted by globalization for precipitating the current crisis. He spoke to TIME's David E. Thigpen from Troy, Michigan:
TIME: You say the defined benefit is the culprit here?
MILLER: The defined pension benefit is dying a slow agonizing death. And I think it should be. It is not the right thing for workers. The problem for workers is that it lacks portability. Workers today like to be mobile. They may want to work one place for ten years and then go to another place. If you have a defined benefit program you are pretty much locked in. If you walk away from your employer you kiss your whole retirement package goodbye. That's not healthy. Instead you ought to have more of a 401k-style plan where you want to move you take it with you.
And it's not good for companies. Take a company that has a defined benefit program to someone who is 25 years old. It is something that a worker expects to collect on 50 or 60 years from now. No business can realistically give assurances that that promise can be made good 50 years from now not knowing what will be the course of history. You should make a promise today with a 401kif you work for me today I will put money in your account today for your retirement. It's yours, you take it with you if you want to go.
TIME: The role of a company in an individual's retirement-is it gone? Is that the way it should be?
MILLER: Yes, that's the way it should be.
TIME: What role does globalization play?
MILLER: Globalization is one of the factors that has hastened the arrival of the problem, but the fundamental problem is the whole concept of a defined benefit program. It has been exacerbated by our aging population. Defined benefit was created in an era when people worked till 65 and died at 70. There were so many active workers compared to the number of people on retirement that it was just not an issue. But that has reversed. At Bethlehem Steel I had 12,000 workers and 130,000 dependents. There was no way that I could make sense of that. GM has more than 1 million people on retirement. The ratio is getting worse for them. How are they dealing with it? Selling assets, cutting back business, and the inability to provide adequate capital in part contributes to a declining market share. They are in a downward spiral. They need to face it and reverse it.
TIME: Will U.S. workers' wages need to match the wages paid in Mexico and China to be competitive?
MILLER: No. The cost of living is generally higher in America and there are a lot of sectors of the economy that cannot be moved overseas. A lot of the processes going into an automobile are going to stay in America. There's a lot of assembly activity here because it is economical. And then you have all the service industries and knowledge industries and everything else that are inclined to be in America. But there will be fewer unskilled jobs that will be paid at the very high rates we've seen. Globalization is forcing us to recognize these cost problems and deal with them forthrightly. If we want to have an average standard of living in America that is higher than other countries then we need to have better educated people than other countries. The policy prescription is let's do something better in terms of education of our kids. We [also] need to look at all the social costs [imposed] on the process of production. Trying to load all of our health care burden in a very inefficient healthcare system on to the productive sectors of our societyall you do is drive that production elsewhere. So there are some things we can do to stop the exodus of American jobs through public policy.
TIME: Is the U.S. government doing everything it can?
MILLER: No. Health care is very much at the top of the list of things where we can do better as a country.
TIME: Why is nothing getting done on the governmental level?
MILLER: Most things that can be done will involve some level of shared sacrifice between business, labor and government. But each group wants someone else to bear that sacrifice. Its a difficult political job. I don't underestimate it. The one useful purpose perhaps that the startling event of a Delphi bankruptcy can bring is a wake-up call so we can all get to work on the things that are bothering the auto industry and in fact all of America's industrial production.
TIME: What other industries do you expect will be affected?
MILLER: The traditional, large employer, concentrated, capital-intensive industries and one after another they are hitting the wall.
TIME: Even with the new efficiency we may get from restructuring, isn't stiff competition from foreign automakers also hurting U.S. manufacturers? MILLER: The Japanese are not a low-cost country. They are a high-cost country. But they early on figured out that technological excellence was a way to win and efficiency in the factories was a way to win. And they have done a much better job particularly on factory efficiency than we have. Part of that goes to the cumbersome work rules that so crippled the steel industry, the airline industry and are crippling the auto industry. And that's one of the things we're going to be dealing with as we go about revising our labor contracts.
TIME: Did excess power on the part of labor help lead to the current crisis?
MILLER: Excess is a pejorative word. But the fact is there has been collective denial of the need to become more productive. We need to clean up our own act. And cleaning up our own act means getting competitive on wages and benefits. We just need to be competitive with other American industrial companies. Our unions have contracts that are at one-half to one-third higher than the cost level at competitive supplier companies. And those people still buy cars and live in homes. What we're talking about is not breaking the unions. We're talking about getting competitive. If you work at Delphi you may have to buy a Chevrolet instead of an Escalade. I was talking to some hourly workers at Boeing and they can't buy a Boeing airplane.