GM offers buyouts of up to $140,000; one-third of factory workers eligible

3/23/2006

DETROIT - General Motors Corp., struggling with mounting losses and eroding market share, offered buyouts of as much as $140,000 to a third of its U.S. factory employees and agreed with its biggest auto-parts supplier on ways to entice workers to retire.

The deal with the United Auto Workers reduces the chances of GM being crippled by a strike at Delphi Corp., its bankrupt former parts-making unit.

The arrangement is a bold move that could flush out a wave of workers with health-care and pension obligations, thus saving the firm money. Analysts, however, said the cuts may not be enough.

Nearly 126,000 GM and Delphi employees would be eligible for the buyouts and retirement incentives, one of the largest such programs ever. The automaker did not say how many workers it expected to accept the offer, but it is aiming to slash 30,000 hourly jobs by 2008.

"This marks the end of 20th-century industrial America and maybe, finally, the beginning of 21st-century industrial America," said Sean McAlinden, a labor analyst at the Center for Automotive Research in Ann Arbor.

"Turning over an entire labor force has never happened on this scale," he said.

It is unclear how many hourly workers in the Toledo area would be eligible or how many might be interested. GM has 3,500 employees at Toledo's Powertrain transmission plant and 2,100 at a Defiance Powertrain factory. Delphi has 350 at an Adrian plant and 1,100 at a Sandusky wheel-bearing factory.

Worker reaction was mixed.

John Clark, president of UAW Local 2031 at the Delphi instrument-panel factory in Adrian, said members were weighing the package. He credited union negotiators with protecting as many workers as possible.

"There's going to be a lot of people who may not feel good about it," he said. "None of us feel good about having to take a buyout or an incentive package."

However, Dan Fairbanks, president of UAW Local 1618 in Lansing, said, "For our members, this is fantastic. There's some huge incentives here."

Michael Balls, 49, a pipefitter at the Delphi steering systems plant in Saginaw, Mich., was more cautious. "I feel a lot better, but I'm still questionable about some things," he said. With 30 years of service, he is eligible to retire and would get $35,000, which he might take.

The world's No. 1 automaker provided no price tag for the package but said last week its costs for bailing out Delphi would be at least $5.5 billion.

Morningstar Inc. analyst John Novak in Chicago said, "If they can convince a significant number of people to take these offers, it would be money well spent."

GM lost $10.6 billion last year as U.S. buyers flocked to models from Toyota Motor Corp. and other Asian rivals with nonunion U.S. labor. GM's troubles helped push Delphi, its biggest supplier, into bankruptcy in October.

Delphi Chief Executive Officer Steve Miller is still seeking to reduce his workers' wages to $12.50 an hour from $27.

Delphi, the spinoff parts supplier from GM, reiterated that it plans to ask a U.S. bankruptcy court judge for permission to cancel labor contracts on March 31 if the company and its unions do not agree on wage cuts by then. The UAW has threatened to strike if the contracts are thrown out.

Under the program disclosed yesterday, about 113,000 GM workers will be eligible for early retirement incentives or buyouts of between $35,000 and $140,000, depending on how long they were employed and whether they want to keep health care and other benefits.

At Delphi, GM's former parts division and largest supplier, 13,000 U.S. hourly workers will be eligible for a lump sum payment of $35,000 to retire. Also, up to 5,000 Delphi workers will be eligible to return to GM.

The $140,000 buyout applies to GM workers with at least 10 years experience, the UAW said. Those with less experience can choose a $70,000 buyout. The Delphi accord would let 13,000 Delphi workers qualify for special retirement that pays up to $35,000 to some eligible employees, the company said.

Employees who accept GM's buyout offer would keep GM pension benefits already earned and give up GM health care and other postretirement benefits. A full GM pension for UAW workers is $36,000 a year plus medical coverage.

GM, with about 105,000 active U.S. hourly union workers, has about 36,000 workers with the full 30-years of eligibility to retire and Delphi has 8,000, a GM spokesman said. Another 27,000 GM workers are within three years of reaching the 30 needed to retire.

About 80 percent of GM's 19,000 employees in Ohio are hourly workers at plants in Toledo, Defiance, Moraine, Lordstown, Mansfield, Parma, Cincinnati, and Columbus. Delphi employs about 13,000 workers in Ohio at plants in Sandusky, Dayton, Warren, and Columbus.

Workers will have up to 52 days to decide whether to take the buyouts once they learn details in plant meetings, and retirements could begin as early as June 1, the company said.

Under the plan, GM would pay for the Delphi early retirement incentives and assume some postretirement benefits for Delphi employees who go back to work for GM.

Himanshu Patel, an auto analyst with JPMorgan, said GM will likely pay around $2 billion for the Delphi buyouts based on recent financial filings, while Merrill Lynch analyst John Murphy said GM will probably pay "well in excess of $1 billion" for its own buyouts.

Several analysts questioned how much GM and Delphi will save.

Most workers who retire will get full benefits, which doesn't relieve GM's sizable pension obligations, Goldman Sachs analyst Robert Barry said in a note to investors. Savings gained from the retirement of younger workers, he said, will be offset by GM's assumption of Delphi retiree benefits.

Rebecca Lindland, an auto analyst with the consulting firm Global Insight, said she's pessimistic about the number of people who will opt for the buyouts, especially younger workers who have no other health insurance.

"I feel like people are going to look and say, 'Can I give up my job for $35,000?'●" she said.

The Delphi plan must be approved by U.S. Bankruptcy Court, which could happen on April 7. UAW President Ron Gettelfinger and Vice President Richard Shoemaker said they will ask the court to approve the Delphi plan.

The buyouts apply only to UAW-represented workers, but the automaker is negotiating with the International Union of Electronic Workers-Communications Workers of America on a similar deal. Salaried workers are not part of the plan, the company said.

"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," GM Chairman and CEO Rick Wagoner said in a statement.

Still, Harley Shaiken, a labor professor at the University of California at Berkeley, said the toughest bargaining among the three parties lies ahead as they confront Mr. Miller's demands to cut wages and close most of Delphi's North American plants.

"What this indicates is that GM's participation can soften the collision course that Delphi and the UAW were on," Mr. Shaiken said.

GM's buyouts are more generous than those offered so far at Ford Motor Co. The No. 2 U.S. automaker is trying to cut 30,000 jobs and shutter 14 plants by 2012 in North America.

One of Ford's five buyout plans would give workers $15,000 a year for four years of college and provide full medical benefits and half their regular pay while they go to school. Another option is a $100,000 cash payout without health benefits.