Motown Mechanic

Steve Miller, CEO of newly bankrupt Delphi Corp., has always known how to cut the tension in difficult situations. As a young Chrysler exec during its 1980 federal-bailout talks, he once pulled out a toy pistol at a bankers' meeting and held it to his head, saying: "If you guys can't agree on this stuff, I'm going to have to kill myself." Last month, with Delphi in feverish (and ultimately fruitless) negotiations for a bailout from General Motors, Miller found himself beside GM CEO Rick Wagoner at an executive confab in Washington. Miller's BlackBerry buzzed. It was a flaming e-mail from an employee. "You are a rapist and a pillager and a thief of the working man's rights," it read, "and may you rot in hell." Miller showed it to Wagoner, saying: "Hey, Rick, this one's for you."

His gallows humor aside, what Miller is engineering is no laughing matter. Since he arrived this summer to save Delphi, the feared and revered corporate fireman is loudly proclaiming an uncomfortable truth: Detroit, the last bastion of blue-collar affluence, is collapsing under the weight of pension and health-care costs. That's what drove Delphi into Chapter 11 this month, the largest industrial bankruptcy ever. Spun off from GM in 1999, America's largest car-parts maker is losing billions because its average of $65 in hourly labor costs is at least three times as high as its domestic rivals'. Not to mention the flood of cheap offshore car parts that will likely lead Miller to close several factories making commodity parts. "Paying $65 an hour for someone mowing the lawn at one of our plants," says Miller, "is just not going to cut it." Delphi's bankruptcy, Miller warns, could become the tipping point for not just the fall of Detroit but for all of industrial America. In a global economy, Miller argues, American business can no longer afford labor contracts that require it to "burn the furniture" to feed ever-growing pension and health-care obligations. "What's happening at Delphi is just a small part of a huge national problem," he says. "This is our country's dilemma as we talk about Medicare and Social Security."

The straight-talking 63-year-old has been down this road before. He took Bethlehem Steel into bankruptcy in 2001, vaporizing its workers' pensions in the process, and he sat on United Airlines' board when it went Chapter 11 a year later. After helping Chrysler dodge bankruptcy twice, Miller has never been satisfied with an everyday job. "I cannot resist a challenge," he told NEWSWEEK on his first day on the job at Delphi. "And I've seen this movie before." If he can't persuade the powerful United Auto Workers to take a two-thirds compensation cut, then money-losing GM and Ford have little hope of getting desperately needed concessions. (GM could even end up on the hook for $11 billion in obligations to its former workers now at Delphi.) "If they can't modify their labor contracts," he says, "Ford and GM are very much at risk of spiraling down into an ultimate bankruptcy."

The union accuses Miller of creating a new class of working poor. The $10 an hour wages he's after equal $20,800 a year--less than half the median family income in America. "We helped create the middle class, and that was good for all of America," says former UAW president Doug Fraser. "You hate to see that all unravel."

As draconian as Miller's moves are, analysts say they provide a much-needed wake-up call. "Detroit was in denial," says Banc of America's Ron Tadross. "This is an intervention." And Miller contends his painfully lean new model needs to be supplemented by government help in health care and pensions. "I don't want this to completely come out of the hide of our people," he says. Last week he spoke to Hillary Clinton and says they agreed to work together to get Washington to reconsider health-care reform. (Clinton declined to comment.)

Miller seems uncomfortable cast as the enemy of the workingman. Each night, he stays up late, responding to every piece of hate mail from his workers. A recent example: "You will walk away from this process paid for life, just like every other funeral you've presided over." Miller's response: "I'm painfully aware that I'm responsible for the welfare of thousands of employees. That's what keeps me up at night." There are many sleepless nights ahead for Miller.