The following article appeared in the Wall Street Journal June 27, 2006.
GM's Buyout Package Attracts 35,000 Workers
Response Lets Auto Maker Accelerate Job-Cut Target, Raise Cost-Savings Goal
By LEE HAWKINS JR. in Detroit and KRIS MAHER in Pittsburgh
June 27, 2006
Response Lets Auto Maker Accelerate Job-Cut Target, Raise Cost-Savings Goal
By LEE HAWKINS JR. in Detroit and KRIS MAHER in Pittsburgh
June 27, 2006
General Motors Corp. said about 35,000 hourly workers agreed to take financial incentives to leave the auto maker, allowing it to meet its job-cut target ahead of schedule and to increase its cost savings to $5 billion this year.
More workers than expected took part in what has become one of the largest employee buyouts in U.S. history, representing about 30% of the company's hourly work force, mostly represented by the United Auto Workers union. The reductions put the world's No. 1 auto maker by production ahead in meeting its job-cut target, which it set at 30,000 jobs by 2008 through attrition and other methods
Meanwhile, GM's former parts division, Delphi Corp., which separately offered a similar program to its union workers, said 12,600 UAW-represented workers took packages to leave. That total, also greater than expected and representing about 38% of its hourly work force, should help the parts maker emerge from bankruptcy-court protection as a more streamlined competitor and could reduce the power of the UAW there as it discusses wage and benefits cuts with the company.
GM said the reductions would help it increase cost savings this year by $1 billion to a total of $5 billion in reduced structural costs, which it said don't vary with production and include all costs other than material, freight and policy and warranty costs.
"Our goal in restructuring the company is not just to change GM's bottom line from red to black," said Rick Wagoner, chairman and chief executive officer. "Our goal is to structure GM for sustained profitability and growth, to set us up to be successful for years to come in an ever-more competitive global auto industry. Today's announcement takes us one step closer to that goal."
The faster-than-expected job reductions should help GM stabilize its finances and help secure Mr. Wagoner's position. His future at the top of the company had been uncertain after GM reported a loss of $10.6 billion for 2005, amid sliding North American market share and a decline in popularity of more profitable but less fuel-efficient models.
GM said it expected to take a $3.8 billion charge mostly in the second quarter, reflecting payments to employees, the change to its pension and benefits liabilities and a revision in accounting for announced plant closures. GM said it would disclose more details when it releases second-quarter results next month.
The company offered 113,000 hourly workers $35,000 to $140,000 in lump-sum payments to leave the company. The deadline for accepting was Friday, although some workers have until the end of the week to change their minds.
GM said about 4,600 employees accepted buyouts and about 30,400 chose to retire. Workers with 27 years or more at GM would receive full retiree benefits, while workers with less seniority could keep their accumulated pensions. GM said the program would reduce the ranks at its Jobs Bank, which provides pay and benefits to idled workers. As many as 5,000 Delphi workers could leave but return to GM.
The auto maker faces a number of challenges. Mr. Wagoner needs to halt the company's slide in U.S. market share and persuade customers to pay higher prices. The buyouts pose a challenge because some plants may be left short-handed. GM said it will use temporary employees as necessary.
At a GM metal-stamping plant in West Mifflin, Pa., slated to close by the end of next year, roughly half of the UAW workers, 241 out of 520, accepted packages to leave including cash buyouts, according to Rick Vargesko, president of local 544. Workers there make hoods, doors and roofs for models that include GM's Cobalt.
Some workers will leave when they retire in the fall, but Mr. Vargesko said he expects "a good size exodus" in July and August. He said the company has been hiring temporary workers and training them during the past several weeks. As for how the buyouts will impact production at the plant, "it all depends on the skilled trades," Mr. Vargesko said. "We have really good skilled tool-and-die people here."
Local union leaders have expressed concerns about whether the right workers at the right plants -- mainly older workers at plants set to close -- took the buyouts.
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