Big buyout response buoys GM
Thursday, May 25, 2006
Big buyout response buoys GM
Early-leave sign-ups race past 20,000, may put automaker ahead of schedule on turnaround.
Brett Clanton / The Detroit News
DETROIT -- More than 20,000 U.S. factory workers at General Motors Corp. have accepted buyout offers, surpassing the automaker's internal target with a month to go before the deadline, according to people familiar with the situation.
The stronger-than-expected response means GM is well on its way to reaching and eventually exceeding its goal of eliminating 30,000 U.S. hourly jobs by the end of 2008 -- a central piece of its North American restructuring plan.
The automaker, which made the offers to all 113,000 of its U.S. hourly workers in one of the biggest buyout programs in corporate history, had expected 20,000 employees to come forward by the June 23 deadline, the sources said.
Though it has surpassed the goal, GM will continue to offer buyouts to workers who sign up by the deadline. Under an agreement with the United Auto Workers, there is no maximum number of buyouts that GM can accept. Sources say the automaker plans to take as many as it can get.
On Wednesday, GM's stock price rose 9 percent to $26.70 after Merrill Lynch upgraded the automaker from "neutral" to "buy" in a report that expressed optimism about the buyout program's early returns.
Merrill Lynch -- which based its call on a weeks-old UAW update that 12,400 GM workers had accepted buyouts -- estimates that GM will get 30,000 takers before the deadline.
"That would represent a significant acceleration in GM's restructuring plan," said Merrill Lynch's John Murphy in the report.
Citing savings from the buyouts, he raised his estimate of GM's 2007 profit to $4.10 a share from $1.90. He also raised the shares' target price to $37.
GM, which lost $10.6 billion last year after a steep drop in SUV sales and steady market share losses to Asian rivals, could use the boost.
The company is implementing a sweeping restructuring of its North American auto business that aims to close or downsize 12 plants by 2008 and cut $7 billion in costs by next year.
But the process is slow and Wall Street is growing impatient. The threat of a massive strike at its largest supplier, Delphi Corp., is not helping. Nor is a continuing probe into the company's accounting practices, bankruptcy speculation and a recent spike in gas prices, which could wreck sales of GM's profitable SUVs and pickups.
But a victory on the buyout program could go a long way toward putting GM back in the game.
In March, GM and the UAW reached a deal to offer buyouts to thousands of highly paid union workers at the automaker and Delphi, the bankrupt auto parts maker spun off from GM in 1999, to help the struggling companies pare their payrolls and become more competitive.
The "accelerated attrition" plan offers $35,000 and full retirement benefits to workers at both companies with 30 years or more of service and a full retirement to workers with 27 years or more who leave now. GM workers with fewer than 27 years but more than 10 may receive a one-time payment of $140,000 to walk away and sever all ties, while those with fewer than 10 years can take $70,000 to leave and forgo benefits.
Since the plan was introduced, GM workers such as Marty Thompson have been mulling their options. The 49-year-old production worker at GM's Hamtramck large car plant has 29 years, but is not eligible for the $35,000 lump-sum payment. That's why he thinks he'll stay.
"I'm ready to go," he said. "But I'm going to wait till September 2007 to see what's in the new contract."
Next fall, the UAW and GM will renegotiate terms of their national agreement, which could provide incentives for early retirement.
Katie McBride, a GM spokeswoman, would not comment on specific buyout numbers the automaker has received. But she did say "we are very pleased with the response so far."
If too many workers accept the offers, GM can activate a provision in the buyout agreement that permits it to hire lower-wage temporary workers to fill the gaps. GM can also hold on to buyout takers until Jan. 1, 2007, if it is short-staffed at certain facilities.
McBride said a "limited" number of temporary workers have already been hired at several GM plants because the response to the program has "exceeded expectations." Those workers, she said, earn about $18 per hour, compared with $27 per hour for existing GM workers.
Temporary workers will be used as a "bridge" until GM can find permanent replacements, which will come from a jobs bank of idled employees and other GM plants that are closing, McBride said.
GM is also reclaiming 5,000 former workers from Delphi as part of the attrition program.
You can reach Brett Clanton at (313) 222-2612 or bclanton@detnews.com.
Big buyout response buoys GM
Early-leave sign-ups race past 20,000, may put automaker ahead of schedule on turnaround.
Brett Clanton / The Detroit News
DETROIT -- More than 20,000 U.S. factory workers at General Motors Corp. have accepted buyout offers, surpassing the automaker's internal target with a month to go before the deadline, according to people familiar with the situation.
The stronger-than-expected response means GM is well on its way to reaching and eventually exceeding its goal of eliminating 30,000 U.S. hourly jobs by the end of 2008 -- a central piece of its North American restructuring plan.
The automaker, which made the offers to all 113,000 of its U.S. hourly workers in one of the biggest buyout programs in corporate history, had expected 20,000 employees to come forward by the June 23 deadline, the sources said.
Though it has surpassed the goal, GM will continue to offer buyouts to workers who sign up by the deadline. Under an agreement with the United Auto Workers, there is no maximum number of buyouts that GM can accept. Sources say the automaker plans to take as many as it can get.
On Wednesday, GM's stock price rose 9 percent to $26.70 after Merrill Lynch upgraded the automaker from "neutral" to "buy" in a report that expressed optimism about the buyout program's early returns.
Merrill Lynch -- which based its call on a weeks-old UAW update that 12,400 GM workers had accepted buyouts -- estimates that GM will get 30,000 takers before the deadline.
"That would represent a significant acceleration in GM's restructuring plan," said Merrill Lynch's John Murphy in the report.
Citing savings from the buyouts, he raised his estimate of GM's 2007 profit to $4.10 a share from $1.90. He also raised the shares' target price to $37.
GM, which lost $10.6 billion last year after a steep drop in SUV sales and steady market share losses to Asian rivals, could use the boost.
The company is implementing a sweeping restructuring of its North American auto business that aims to close or downsize 12 plants by 2008 and cut $7 billion in costs by next year.
But the process is slow and Wall Street is growing impatient. The threat of a massive strike at its largest supplier, Delphi Corp., is not helping. Nor is a continuing probe into the company's accounting practices, bankruptcy speculation and a recent spike in gas prices, which could wreck sales of GM's profitable SUVs and pickups.
But a victory on the buyout program could go a long way toward putting GM back in the game.
In March, GM and the UAW reached a deal to offer buyouts to thousands of highly paid union workers at the automaker and Delphi, the bankrupt auto parts maker spun off from GM in 1999, to help the struggling companies pare their payrolls and become more competitive.
The "accelerated attrition" plan offers $35,000 and full retirement benefits to workers at both companies with 30 years or more of service and a full retirement to workers with 27 years or more who leave now. GM workers with fewer than 27 years but more than 10 may receive a one-time payment of $140,000 to walk away and sever all ties, while those with fewer than 10 years can take $70,000 to leave and forgo benefits.
Since the plan was introduced, GM workers such as Marty Thompson have been mulling their options. The 49-year-old production worker at GM's Hamtramck large car plant has 29 years, but is not eligible for the $35,000 lump-sum payment. That's why he thinks he'll stay.
"I'm ready to go," he said. "But I'm going to wait till September 2007 to see what's in the new contract."
Next fall, the UAW and GM will renegotiate terms of their national agreement, which could provide incentives for early retirement.
Katie McBride, a GM spokeswoman, would not comment on specific buyout numbers the automaker has received. But she did say "we are very pleased with the response so far."
If too many workers accept the offers, GM can activate a provision in the buyout agreement that permits it to hire lower-wage temporary workers to fill the gaps. GM can also hold on to buyout takers until Jan. 1, 2007, if it is short-staffed at certain facilities.
McBride said a "limited" number of temporary workers have already been hired at several GM plants because the response to the program has "exceeded expectations." Those workers, she said, earn about $18 per hour, compared with $27 per hour for existing GM workers.
Temporary workers will be used as a "bridge" until GM can find permanent replacements, which will come from a jobs bank of idled employees and other GM plants that are closing, McBride said.
GM is also reclaiming 5,000 former workers from Delphi as part of the attrition program.
You can reach Brett Clanton at (313) 222-2612 or bclanton@detnews.com.
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