Buyouts Promise a Big Boon for GM
Some 37,000 Workers Plan To Exit Auto Maker, Delphi; Fresh Obstacles Emerge
Some 37,000 Workers Plan To Exit Auto Maker, Delphi; Fresh Obstacles Emerge
By JEFFREY MCCRACKEN and LEE HAWKINS JR.
June 23, 2006
About 37,000 hourly workers have so far accepted offers by General Motors Corp. and auto supplier Delphi Corp. to leave the companies, union officials say, potentially giving the auto maker greater cuts than expected but presenting a new set of questions to overcome.
In one of the largest employee-buyout programs in U.S. corporate history, about 28,000 GM workers -- or nearly 25% of the car maker's work force represented by the United Auto Workers union -- had taken early-retirement offers or buyouts as of late yesterday for an offer that ends today, UAW officials said. At Delphi, the former GM parts unit that filed for Chapter 11 bankruptcy in October, about 9,000 workers had so far taken offers, those officials said.
GM in the past had said it hoped to cut 30,000 hourly jobs by 2008 through attrition and other methods, but the buyout program has put it near that goal after less than a year. The number could grow some, as many workers make last-minute decisions, UAW officials said. Workers who put in for a buyout have another week to change their minds. Both GM and Delphi are expected to disclose preliminary numbers next week.
Indications that the offers are drawing more takers than expected have cheered Wall Street, which has worried about GM's ability to stanch hundreds of millions of dollars in losses at its core North American auto operations and the potential liabilities it faces as Delphi seeks to streamline its operations. As a result of the acceleration, John Murphy, analyst with Merrill Lynch & Co., estimated last week that GM by early next year could save $2.5 billion of the $3 billion it had said it expects to save by 2008.
But GM still has to tally the cost of the program, which offered 113,000 UAW workers between $35,000 and $140,000 to leave the auto maker. Workers with 27 years or more at GM would receive full retiree benefits, while workers with less seniority could keep their accumulated pensions. GM may also face questions of whether the right workers at the right plants -- specifically, older workers at plants set to close -- took the buyouts, or whether it may have to realign its work force somewhat to adjust for different acceptance levels at different plants.
GM, which had a loss of $10.5 billion last year, is still discussing when it will release the financial impact of the buyout program. GM spokeswoman Toni Simonetti said it might provide information next week or when it releases second-quarter earnings. "There is an initial cost of offering this program, but in the long term, there is a tremendous ongoing savings," she said.
Ms. Simonetti said a tally of GM's savings must include whatever number of Delphi workers GM takes back as a result of a flowback agreement with its former parts unit. As many as 5,000 Delphi workers can transfer back to GM.
On the issue of staffing at plants, Ms. Simonetti said company officials "have been planning to make sure that we have appropriate staffing levels where needed so we can continue operations."
Delphi made early-retirement and buyout offers to its 24,000 UAW members and later extended them to other unionized Delphi workers. Delphi has about 33,000 hourly employees.
GM expects to see its retirement obligations shrink considerably, since GM employees who accept the cash buyout will forgo larger pensions and health-care benefits.
It isn't clear what percentage of workers took early retirement compared with those who took larger cash buyouts to leave behind retirement health care. At the Corvette plant in Bowling Green, Ky., 257 workers out of 1,075 have decided to leave GM, said UAW 2164 President Eldon Renaud. He said 79 workers are taking buyouts and 178 early retirement. "We had 60 walk in and take one of the offers in the last day or so. We will fill about 80 of those jobs with GM people from Oklahoma City or Spring Hill [Tenn.], where plants are closing."
Standard & Poor's credit analyst Robert Schulz said the ratings agency, which has GM rated deep into speculative-grade territory, is encouraged by the company's progress.
June 23, 2006
About 37,000 hourly workers have so far accepted offers by General Motors Corp. and auto supplier Delphi Corp. to leave the companies, union officials say, potentially giving the auto maker greater cuts than expected but presenting a new set of questions to overcome.
In one of the largest employee-buyout programs in U.S. corporate history, about 28,000 GM workers -- or nearly 25% of the car maker's work force represented by the United Auto Workers union -- had taken early-retirement offers or buyouts as of late yesterday for an offer that ends today, UAW officials said. At Delphi, the former GM parts unit that filed for Chapter 11 bankruptcy in October, about 9,000 workers had so far taken offers, those officials said.
GM in the past had said it hoped to cut 30,000 hourly jobs by 2008 through attrition and other methods, but the buyout program has put it near that goal after less than a year. The number could grow some, as many workers make last-minute decisions, UAW officials said. Workers who put in for a buyout have another week to change their minds. Both GM and Delphi are expected to disclose preliminary numbers next week.
Indications that the offers are drawing more takers than expected have cheered Wall Street, which has worried about GM's ability to stanch hundreds of millions of dollars in losses at its core North American auto operations and the potential liabilities it faces as Delphi seeks to streamline its operations. As a result of the acceleration, John Murphy, analyst with Merrill Lynch & Co., estimated last week that GM by early next year could save $2.5 billion of the $3 billion it had said it expects to save by 2008.
But GM still has to tally the cost of the program, which offered 113,000 UAW workers between $35,000 and $140,000 to leave the auto maker. Workers with 27 years or more at GM would receive full retiree benefits, while workers with less seniority could keep their accumulated pensions. GM may also face questions of whether the right workers at the right plants -- specifically, older workers at plants set to close -- took the buyouts, or whether it may have to realign its work force somewhat to adjust for different acceptance levels at different plants.
GM, which had a loss of $10.5 billion last year, is still discussing when it will release the financial impact of the buyout program. GM spokeswoman Toni Simonetti said it might provide information next week or when it releases second-quarter earnings. "There is an initial cost of offering this program, but in the long term, there is a tremendous ongoing savings," she said.
Ms. Simonetti said a tally of GM's savings must include whatever number of Delphi workers GM takes back as a result of a flowback agreement with its former parts unit. As many as 5,000 Delphi workers can transfer back to GM.
On the issue of staffing at plants, Ms. Simonetti said company officials "have been planning to make sure that we have appropriate staffing levels where needed so we can continue operations."
Delphi made early-retirement and buyout offers to its 24,000 UAW members and later extended them to other unionized Delphi workers. Delphi has about 33,000 hourly employees.
GM expects to see its retirement obligations shrink considerably, since GM employees who accept the cash buyout will forgo larger pensions and health-care benefits.
It isn't clear what percentage of workers took early retirement compared with those who took larger cash buyouts to leave behind retirement health care. At the Corvette plant in Bowling Green, Ky., 257 workers out of 1,075 have decided to leave GM, said UAW 2164 President Eldon Renaud. He said 79 workers are taking buyouts and 178 early retirement. "We had 60 walk in and take one of the offers in the last day or so. We will fill about 80 of those jobs with GM people from Oklahoma City or Spring Hill [Tenn.], where plants are closing."
Standard & Poor's credit analyst Robert Schulz said the ratings agency, which has GM rated deep into speculative-grade territory, is encouraged by the company's progress.
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