Packard needs fewer workers as it becomes more efficient, an executive says.
By DON SHILLING
VINDICATOR BUSINESS EDITOR
WARREN -- The work force at Delphi Packard Electric Systems continues to shrink as aging workers retire.
Packard, one of the area's largest and best-paying employers, will have fewer than half the 8,600 hourly workers that were on the payroll in 1995 if 800 people retire next year as the company expects.
Many workers are leaving the maker of wiring systems and electrical components to take advantage of a $15,000 retirement bonus that's available at certain times in its labor contract. The bonus is in addition to the $2,730-a-month pension due to most 30-year employees who would retire next year.
About 730 people retired last year, leaving Packard with 4,700 hourly workers in this area. About 1,600 are eligible for retirement incentives next year, and about half are expected to leave, said John Sefcik, director of U.S. operations.
Packard, a locally based division of Delphi Automotive Systems in Michigan, also has about 1,900 salaried workers in the area.
Steady number: That number has held steady as retirements in the salaried ranks have been offset by the addition of workers from companies that Packard has acquired. Delphi Automotive is offering retirement incentives for salaried workers to try to cut 1,400 jobs throughout its divisions by March 31.
In past years, Packard has adjusted to having fewer hourly workers by sending labor-intensive final assembly work to Mexico.
Focus of operations: Packard's local operations now are focused on making components for wiring systems, such as plastic and metal parts and cable. Those operations take fewer workers than assembling wiring harnesses because machines can churn out large numbers of parts.
Sefcik said no work was sent to Mexico last year, although some business ended when certain car models died.
Packard officials, however, are considering moving the making of bused electrical centers, which employ 500 people locally, to another area.
The product was created in 1996 but now is under review because of Packard's acquisition of the switch division of Eaton Corp., Sefcik said. The product is a blend of the strengths of Packard and Eaton, so company officials are considering where the business would be best located, he said.
For the most part, however, Packard needs fewer workers now, not because it is moving business, but because it is becoming more efficient, he said.
Cost cuts: Packard must find ways to cut costs because the marketplace is competitive, he said. Customers are demanding better quality at lower prices, he said.
Packard's goal is to improve efficiency by 8 percent to 10 percent a year, meaning local operations should need hundreds fewer workers each year, he said.
Sefcik said he is hoping hourly workers will aid efforts to install lean manufacturing techniques, which include finding areas of waste and better ways of moving material.
Union officials have participated in workshops on lean manufacturing, and the company now is having workshops for workers.
The goal is to have everyone engaged in finding ways to improve operations, he said. Even small improvements help because they build on each other, he said.
"Pretty soon, you come up with home runs, not just base hits," he said.
Will have to hire: As retirements occur next year, Packard will have to hire workers. A labor contract requires it to move workers in its third wage tier to the second tier as people retire. The third tier is nearly empty, so Packard will have to hire one worker for every three that leave.
Second-tier workers receive 55 percent of normal pay, but gradually receive raises until they are at parity in 10 years. Third-tier workers stay at the 55 percent level.
The success of Packard's refurbished plastics plant in Cortland shows what can be done with the combination of new equipment and management-union cooperation, he said.
The plant, which opened in 2000, has a zero-defect rate for external customers.
"It's a number quite honestly that our customers are very surprised at," he said.
The plant has a defect rate of about four parts per million for products shipped within Delphi.
Sefcik said the company's plastic molding operation on Dana Street in Warren, which has older equipment, has a defect rate of about 300 parts per million.
A second plastics plant is being built in Vienna Township as Packard is replacing the Dana Street operation with new machines that operate in a temperature-controlled environment. Each plant will have 120 molding machines.
Packard spent about $42 million to remodel and equip the Cortland plant. That number boosted Packard's total capital investment in 2000 to $91 million, compared with between $72 million and $75 million the previous four years.
The number dropped to $40 million last year, but it will be back up again this year because Packard is spending about $60 million on the Vienna plant, Sefcik said.
The success of the Cortland plant, which employs about 160, will help Packard as it makes other investment proposals to corporate officials in Michigan, he said.
Smaller investments are being made in Packard's other local operations.
Metal stamping operations on North River Road are in the middle of an $8 million upgrade. New presses, a weld line and plating line are being installed to create more capacity, he said.
Packard had been using an outside supplier to make metal parts in a new product, but officials decided it would cost less to make them in its own plants, Sefcik said. About 25 workers are involved.
Cable-making: Packard last year finished a $2 million improvement in its cable-making operations. A new rod mill, which draws copper down into small sizes, was installed. Sefcik said the new equipment creates more capacity, so Packard is looking for more customers for its cable.
Future investment depends on auto sales and Packard's success in developing its nonautomotive business, he said.
Packard is courting companies such as computer makers and electronic companies to let them know it has products for them, he said. Once the economy rebounds and these companies start looking for suppliers, Packard hopes to attract new business.