Auto-Parts Companies in Financial Freefall

KOKOMO, Ind., Dec. 27, 2005 — -- A vicious shakeout has occurred in the nation's largest manufacturing sector -- the auto-parts industry.

The decline of the domestic automakers and the fierce competition from overseas suppliers have forced more than three dozen parts manufacturers into bankruptcy this year, including the largest, Delphi Corp., a colossus with 50,000 U.S. workers.

The company wants to cut salaries and slash its work force. Its employees are angry and scared.

For thousands of Delphi workers and millions more who occupy hard-won places in America's middle class, a day of reckoning is approaching.

"There's no soft landing possible," said Patrick Anderson, founder of the Anderson Economic Group. "The choice is between a hard landing and a crash landing."

Scott McCrumb is a shipping clerk at Delphi's Kokomo, Ind., plant where his mother, uncle and grandfather all worked.

"Everybody worked there," said McCrumb. "It seemed like there were no worries."

But that was then. Now a bankrupt Delphi says it must have a leaner, lower-paid work force to make a profit.

"Today we are paying double, triple or more for hourly labor compared to what prevails in the marketplace. No business can survive doing that," said Delphi chief executive officer Robert Miller.

Across the country, auto parts suppliers tied closely to Detroit's Big Three automakers have proposed to cut wages drastically, trim workers and close plants.

A strike at Delphi could jeopardize the solvency of General Motors itself.

Although this month Delphi withdrew a proposal to cut worker pay by two-thirds, there is little doubt it will keep pressing for major reductions.

Especially galling for workers is the widely criticized pay bonuses and incentives company officials receive, which Delphi engineered even as it filed for bankruptcy. The company paid potentially hundreds of millions of dollars for 600 "key executives" it wants to retain.

But cut the pay of workers while you raise it for those who led Delphi to bankruptcy?

"Philosophers can speculate about fairness," said Miller. "I have to deal with reality."

Matt McKillip, the mayor of Kokomo -- which is home to 5,500 Delphi workers -- has to deal with reality too.

"Some of these people could lose their homes if their salaries are cut to the levels that are being discussed," McKillip said.

McCrumb is one of those who could be affected.

"It would mean we couldn't live here anymore," he said. "We couldn't be in this school district. We'd definitely have to sell our house."

He might also have to sell his truck full of parts made at Delphi.

ABC News' Dean Reynolds filed this report for "World News Tonight."