47,600 hourly workers take severance package from GM, Delphi
June 27, 2006
BY MICHAEL ELLIS and JASON ROBERSON
FREE PRESS BUSINESS WRITERS
In a historic exodus, 47,600 U.S. hourly General Motors Corp. and Delphi Corp. workers have accepted buyouts and early retirement offers as part of a large cost-cutting effort to restore the world's largest automaker to profitability.
The unexpectedly high acceptance rate will result in more than one in three of GM and Delphi's U.S. hourly employees departing by the end of the year, making both companies substantially smaller but more competitive in a brutally tough market.
The companies currently employ about 146,000 hourly workers in the United States. Those accepting the offer include 12,600 workers at Delphi and 35,000 at GM -- far above some early estimates of 20,000 to 25,000.
"We're coming very rapidly on the road back," GM Chief Executive Officer Rick Wagoner said at a news conference Monday at GM's Renaissance Center headquarters.
The impact on the Michigan economy is uncertain. But a partial list of plants obtained Monday night by the Free Press showed that at least 13,500 workers plan to leave from plants in at least 13 Michigan communities. More than 3,400 in the Lansing area alone will be leaving their GM jobs behind.
The job cuts and other sweeping measures Wagoner enacted in recent months will cut costs by a combined $8 billion annually, part of his plan to recover from last year's $10.6 billion in losses.
Over the past year, GM has announced plans to close or idle a dozen plants in North America, dismissed hundreds of white-collar workers, reduced salaried benefits and won concessions from the UAW to shift some health care costs to hourly retirees. Of the GM workers who accepted the offer, 30,400 elected to retire early and 4,600 took a buyout that pays a lump sum of $70,000 or $140,000, depending on years of service, but with no future benefits.
The popularity of the program enabled GM to beat its target of cutting 30,000 jobs in North America by the end of 2008, more than two years ahead of schedule. In addition to the job-cutting offer, about 6,500 hourly workers left in 2005.
GM and Delphi reached agreements with the UAW and another union, the IUE-CWA, in March on the job-cutting offer as part of their efforts to craft a new labor deal at Delphi. GM, the former parent of Delphi and its largest customer, is obligated for some of the retirement costs of Delphi workers, and therefore took an active role in the negotiations.
The Delphi buyouts could help it avoid a costly strike by allowing the automotive parts supplier to cut its workforce without a confrontation with the UAW. But Delphi, which filed for Chapter 11 bankruptcy protection from creditors last October, is still working on negotiating a new labor contract with the UAW.
As a result of the strong acceptance rate of the attrition program, GM increased to $8 billion from $7 billion the amount it expects its cost-cutting measures to save. Of that total, about $5 billion will be realized this year, GM said.
GM workers had until last Friday to sign up for the early retirement or buyout offer. That also was the deadline for thousands of Delphi workers to take early retirement or to transfer to GM. But many Delphi workers could accept a buyout offer similar to GM's that was announced June 9. Delphi spokesman Lindsey Williams said Delphi offered to all hourly workers buyouts ranging from $70,000 to $140,000.
Employees who signed up within the last seven days are still allowed to back out of their decision. But Wagoner said that few had done so in the past.
Even with the large cuts, GM still must reverse the loss of U.S. vehicle sales to competitors such as Toyota Motor Corp.
Gerald Meyers, a professor of management at the University of Michigan and former chief executive at American Motors Corp., said GM should be congratulated for achieving its job-cutting target, but challenges remain ahead.
GM has already cut its UAW workforce heavily -- down from 266,000 in 1993 -- and yet it still hasn't been able to post strong profits consistently. GM suffered its worst year financially in 2005 since nearly going bankrupt in the early 1990s.
"The forces are still there that were cutting them back," Meyers said, referring to GM's falling car and truck sales. "It's not over yet. Unfortunately, in my view, this is one more downsizing, and there will be others."
As workers leave over the remainder of the year, GM will be hard-pressed to keep up its quality, Meyers said.
Brett Hoselton, an auto analyst with Keybanc Capital Markets in Cleveland, Ohio, said the numbers are a little better than he expected. And they only confirm his positive outlook for GM.
"We've been fairly bullish on General Motors for two reasons," he said. "One, we believe they are making substantial changes to the product development program, and two, we thought ... buyouts would be a useful tool." To ease the transition to a smaller workforce, GM has already started hiring temporary workers at some plants, who will be paid wages of about $18 to $19 an hour without benefits.
Traditional union workers cost GM about $81 an hour in 2005, including benefits and retirement costs, or about $168,000 each without overtime, Burnham Securities Inc. analyst David Healy told Bloomberg. Each temporary worker costs about $39,520, he said.
The temporary jobs will eventually be eliminated as GM idles or closes the dozen North American plants it targeted last November, including several in Michigan.
In addition, some GM workers currently in the so-called "jobs bank," where they are paid most of their wages and benefits even though they are not working, could be recalled and put back to work, GM spokesman Dan Flores said. GM also has agreed to hire up to 5,000 workers from Delphi.
The attrition program will cost GM about $3.8 billion.
For tens of thousands of GM and Delphi workers, the offer means a new life outside the automotive industry, and perhaps a short-term spending spree.
"I would think most of this will be saved, but some of this will be spent," said Dana Johnson, chief economist at Comerica Inc. "There's a joke that a lot of man caves are being created."
But Johnson said most of the workers are expected to invest the money for retirement and health care expenses.
June 27, 2006
BY MICHAEL ELLIS and JASON ROBERSON
FREE PRESS BUSINESS WRITERS
In a historic exodus, 47,600 U.S. hourly General Motors Corp. and Delphi Corp. workers have accepted buyouts and early retirement offers as part of a large cost-cutting effort to restore the world's largest automaker to profitability.
The unexpectedly high acceptance rate will result in more than one in three of GM and Delphi's U.S. hourly employees departing by the end of the year, making both companies substantially smaller but more competitive in a brutally tough market.
The companies currently employ about 146,000 hourly workers in the United States. Those accepting the offer include 12,600 workers at Delphi and 35,000 at GM -- far above some early estimates of 20,000 to 25,000.
"We're coming very rapidly on the road back," GM Chief Executive Officer Rick Wagoner said at a news conference Monday at GM's Renaissance Center headquarters.
The impact on the Michigan economy is uncertain. But a partial list of plants obtained Monday night by the Free Press showed that at least 13,500 workers plan to leave from plants in at least 13 Michigan communities. More than 3,400 in the Lansing area alone will be leaving their GM jobs behind.
The job cuts and other sweeping measures Wagoner enacted in recent months will cut costs by a combined $8 billion annually, part of his plan to recover from last year's $10.6 billion in losses.
Over the past year, GM has announced plans to close or idle a dozen plants in North America, dismissed hundreds of white-collar workers, reduced salaried benefits and won concessions from the UAW to shift some health care costs to hourly retirees. Of the GM workers who accepted the offer, 30,400 elected to retire early and 4,600 took a buyout that pays a lump sum of $70,000 or $140,000, depending on years of service, but with no future benefits.
The popularity of the program enabled GM to beat its target of cutting 30,000 jobs in North America by the end of 2008, more than two years ahead of schedule. In addition to the job-cutting offer, about 6,500 hourly workers left in 2005.
GM and Delphi reached agreements with the UAW and another union, the IUE-CWA, in March on the job-cutting offer as part of their efforts to craft a new labor deal at Delphi. GM, the former parent of Delphi and its largest customer, is obligated for some of the retirement costs of Delphi workers, and therefore took an active role in the negotiations.
The Delphi buyouts could help it avoid a costly strike by allowing the automotive parts supplier to cut its workforce without a confrontation with the UAW. But Delphi, which filed for Chapter 11 bankruptcy protection from creditors last October, is still working on negotiating a new labor contract with the UAW.
As a result of the strong acceptance rate of the attrition program, GM increased to $8 billion from $7 billion the amount it expects its cost-cutting measures to save. Of that total, about $5 billion will be realized this year, GM said.
GM workers had until last Friday to sign up for the early retirement or buyout offer. That also was the deadline for thousands of Delphi workers to take early retirement or to transfer to GM. But many Delphi workers could accept a buyout offer similar to GM's that was announced June 9. Delphi spokesman Lindsey Williams said Delphi offered to all hourly workers buyouts ranging from $70,000 to $140,000.
Employees who signed up within the last seven days are still allowed to back out of their decision. But Wagoner said that few had done so in the past.
Even with the large cuts, GM still must reverse the loss of U.S. vehicle sales to competitors such as Toyota Motor Corp.
Gerald Meyers, a professor of management at the University of Michigan and former chief executive at American Motors Corp., said GM should be congratulated for achieving its job-cutting target, but challenges remain ahead.
GM has already cut its UAW workforce heavily -- down from 266,000 in 1993 -- and yet it still hasn't been able to post strong profits consistently. GM suffered its worst year financially in 2005 since nearly going bankrupt in the early 1990s.
"The forces are still there that were cutting them back," Meyers said, referring to GM's falling car and truck sales. "It's not over yet. Unfortunately, in my view, this is one more downsizing, and there will be others."
As workers leave over the remainder of the year, GM will be hard-pressed to keep up its quality, Meyers said.
Brett Hoselton, an auto analyst with Keybanc Capital Markets in Cleveland, Ohio, said the numbers are a little better than he expected. And they only confirm his positive outlook for GM.
"We've been fairly bullish on General Motors for two reasons," he said. "One, we believe they are making substantial changes to the product development program, and two, we thought ... buyouts would be a useful tool." To ease the transition to a smaller workforce, GM has already started hiring temporary workers at some plants, who will be paid wages of about $18 to $19 an hour without benefits.
Traditional union workers cost GM about $81 an hour in 2005, including benefits and retirement costs, or about $168,000 each without overtime, Burnham Securities Inc. analyst David Healy told Bloomberg. Each temporary worker costs about $39,520, he said.
The temporary jobs will eventually be eliminated as GM idles or closes the dozen North American plants it targeted last November, including several in Michigan.
In addition, some GM workers currently in the so-called "jobs bank," where they are paid most of their wages and benefits even though they are not working, could be recalled and put back to work, GM spokesman Dan Flores said. GM also has agreed to hire up to 5,000 workers from Delphi.
The attrition program will cost GM about $3.8 billion.
For tens of thousands of GM and Delphi workers, the offer means a new life outside the automotive industry, and perhaps a short-term spending spree.
"I would think most of this will be saved, but some of this will be spent," said Dana Johnson, chief economist at Comerica Inc. "There's a joke that a lot of man caves are being created."
But Johnson said most of the workers are expected to invest the money for retirement and health care expenses.
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