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GM Offers Workers Up to $140K to Leave
By
Chris Isidore, CNNMoney Senior Writer
March 22, 2006
General Motors Corp. is offering its hourly workers as much as $140,000 each to leave the company as the embattled automaker made its latest effort to cut labor costs and end billions of dollars in losses.
GM announced an agreement with the United Auto Workers union Wednesday, although it did not give the details of the offer extended to all 113,000 U.S. hourly employees. But a source familiar with terms of the offer confirms that those UAW members with 10 years or more service with the automaker will get $140,000 if they agree to forsake the retiree health care coverage that has become a crippling burden for GM. The workers will keep their accured pension benefits, though.
Those with less than 10 years service time will get $70,000 if they leave without the health care coverage.
The company also announced a much anticipated agreement Wednesday with bankrupt auto parts maker Delphi and the United Auto Workers that is seen as a key to avoiding a crippling strike at that key supplier.
GM lost $10.6 billion in 2005 and its executives have not said when they expect it to return to profitability. They have said the agreement with Delphi as well as an agreement with the UAW to cut its own labor costs were keys to return it to the black ink.
Shares of GM were up less than 1 percent in late-morning trading.
GM will pay certain Delphi employees $35,000 to retire early and offer jobs at GM to 5,000 Delphi employees, according to a statement from Delphi. GM hourly employees who are eligible for retirement are also being offered $35,000 to retire early. Both those groups would keep their retiree health care
coverage.|
GM employees who are only a few years short of the 30-years of service needed for the top pension benefit will be offered between $30,000 to $36,000 a year in monthly payments over the next few years as they continue to accrue service time while not working. They also will not need to forfeit their health care coverage.
GM has 36,000 U.S. hourly employees who already have 30 or more years of service and are eligible for retirement, and another 27,000 who are within three years of that 30-years of service, according to GM. The company says the average GM hourly employee is 50.4 years old and has 24 years of service, so a majority of the U.S. hourly work force is within a couple of years of retirement and thus will probably not even have to weigh the possibility of giving up their retiree health care coverage.
The top pay for a GM hourly employee is $27 an hour, but with benefits and future health care costs GM estimates that hour of work is costing the company $73.73 an hour. The $27 an hour in pay works out to about $56,000 a year, plus overtime, so those taking a $140,000 buyout are getting about 2-1/2 years of pay in that lump sum.
GM has job guarantees with the UAW members that run through September 2007, but it announced plans in November to close a dozen plants and facilities and trim 30,000 hourly jobs in North America.
"We said we'd be working with UAW leadership to develop an accelerated attrition program that would help us achieve needed cost reductions as rapidly as possible, while at the same time responding to the needs of our employees," said a statement from GM Chairman and CEO Rick Wagoner. "We are pleased that this agreement will help fulfill that important objective."
GM also has contract obligations to the union members at Delphi, which it spun off in 1999. It said those costs could have gone as high as $12 billion, though last week it said the cost would likely be closer to the $5.5 billion pre-tax charge it took in the fourth quarter.
GM announced Wednesday it will take additional charges this year as part of the new offer.
Besides those contract obligations, GM had an incentive to help Delphi trim its labor costs to avoid a potentially crippling strike by the union at the parts maker, which is still GM's largest supplier. Delphi executives had demanded deep concessions from the union and set a March 30 deadline for a cost-cutting deal, threatening to go to the bankruptcy court to have its labor deals thrown out without an agreement. The union had threatened a strike if Delphi had taken that step.
"An accelerated attrition plan will help enable the transformation of our U.S. manufacturing and support operations into a much more competitive cost base," said a statement from Delphi Chief Operating Officer Rodney O'Neal.
Delphi said that it will continue talks in an effort to achieve a comprehensive agreement with the UAW and other unions at Delphi. But the three-way agreement is generally seen as clearing way for those new labor pacts.
It will present the agreement with GM and the UAW on the early retirement and the return of 5,000 UAW members to the autoworker to the bankruptcy court on April 7.
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