Wow! 47,600 buyouts
Tuesday, June 27, 2006
Wow! 47,600 buyouts
Deal speeds up GM turnaround by 2 years; Delphi exodus paves way for restructuring.
Bill Vlasic / The Detroit News
DETROIT -- More than 47,000 union workers at General Motors Corp. and bankrupt Delphi Corp. have taken buyouts or early retirements in what amounts to the biggest corporate downsizing in U.S. automotive history.
GM said Monday that 35,000 hourly employees have agreed to leave the struggling automaker for packages ranging from $35,000 to $140,000 -- which will allow the company to reach its target reduction of 30,000 hourly jobs by Jan. 1, two years early.
The final tally of buyouts and early retirements far exceeds early estimates and lays the groundwork for a sweeping restructuring of GM's U.S. manufacturing operations.
"It's fair to say we're coming very rapidly on the road back," said GM Chairman and CEO Rick Wagoner at a news conference at GM's Detroit headquarters.
At Delphi, another 12,600 union members have elected to retire early, paving the way for a radical restructuring of the parts maker's U.S. operations.
Wagoner said the buyouts and retirements at GM will cost about $3.8 billion in payments to departing employees and adjustments in pension liabilities. He said GM will take the charge when it releases second-quarter earnings next month.
In announcing the results of the epic attrition program, Wagoner said GM has increased its target for reducing its North American structural costs from $7 billion annually to $8 billion by the end of this year.
GM market share slides
GM lost $10.6 billion last year, sparking speculation on Wall Street that the company was heading toward bankruptcy.
A decades-long slide in U.S. market share, coupled with rising legacy costs, prompted GM in March to offer buyouts or retirement packages to all of its 113,000 U.S. hourly employees.
Delphi, a former unit of GM and its biggest parts supplier, later extended its own buyout and retirement offers to most of its 33,000 unionized workers.
Wagoner said Monday that the downsizing of the GM work force, coupled with buyouts and retirements at Delphi, could set the stage for a peaceful resolution of Delphi's restructuring process.
"It goes a long way toward addressing the issue of a future at Delphi that works for everybody," Wagoner said.
Delphi said Monday that 12,600 of its 24,000 UAW members have accepted retirement deals, but gave no details on how many other workers took buyouts. The company is also offering packages to 8,000 workers represented by other unions.
UAW support noted
The conclusion of GM's attrition program marks another milestone in the wrenching effort to turn around the automaker.
Last fall, GM struck a deal with the UAW that forced retired workers to pay a portion of their health care and required active workers to forgo a wage increase to help cover medical bills.
Wagoner credited the UAW leadership for its "steady support" of GM's moves to return its North American business to profit.
There was no immediate comment from the UAW on Monday.
Wagoner said the 35,000 departing workers include 33,800 represented by the UAW and another 1,200 represented by the International Union of Electrical Workers and Communication Workers of America.
Of the 35,000 who signed up, Wagoner said that 4,600 accepted cash buyouts that included relinquishing their health benefits.
When GM and the UAW agreed in March to the massive "accelerated attrition" plan, industry observers were unsure how the offers would be received by the rank and file. But questions about GM's future and Delphi's restructuring in bankruptcy court helped convince workers to take the money and run.
Buyouts open up options
"The ball really started rolling toward the end," said Bobby Millsap, who took early retirement after 27 years at GM's assembly plant in Oklahoma City.
GM closed the Oklahoma City plant, which made mid-size SUVs, in February. More than 2,200 hourly workers were transferred into the GM "jobs bank," where they continued to receive paychecks but had little hope of returning to their old jobs.
"With these packages, they can afford to get off the assembly line and do something they really want to do," Millsap said.
The exodus of workers should help GM drastically reduce the size of the jobs bank. At one point this year, the automaker was paying about 9,000 hourly workers to sit idle or do community service.
"The question is whether the buyouts are going to be enough to soak up most of the jobs bank," said David Healy, an analyst with Burnham Securities.
Wagoner declined to provide numbers, but said the number of workers in the jobs bank "will be dramatically reduced."
A bigger issue is whether GM can shrink its manufacturing base fast enough to keep up with its falling market share.
GM announced last year plans to close at least 12 plants and engineering centers by 2008.
Analysts predict the overall U.S. new-vehicle sales to sag in June, and GM to fare worse than other manufacturers. Merrill Lynch analyst John Murphy said Wednesday that GM's market share for the month will drop below 24 percent.
It's now a scramble
GM and Delphi will have to scramble to keep plants and assembly lines running by recalling laid-off workers, transferring workers from other plants and hiring temporary workers.
GM said about 9,000 workers have left the company and the remaining workers who took packages have departure dates scattered through the end of the year.
"We feel highly comfortable we can offer continued focus on great quality," Wagoner said.
Healy estimated the cost of a temporary employee at $19 an hour, compared to about $80-an-hour in wages, benefits and retirement costs for current workers. "That's a huge savings," he said.
GM shares closed at $27.75 Monday, up 78 cents.
You can reach Bill Vlasic at (313) 222-2152 or bvlasic@detnews.com.
Wow! 47,600 buyouts
Deal speeds up GM turnaround by 2 years; Delphi exodus paves way for restructuring.
Bill Vlasic / The Detroit News
DETROIT -- More than 47,000 union workers at General Motors Corp. and bankrupt Delphi Corp. have taken buyouts or early retirements in what amounts to the biggest corporate downsizing in U.S. automotive history.
GM said Monday that 35,000 hourly employees have agreed to leave the struggling automaker for packages ranging from $35,000 to $140,000 -- which will allow the company to reach its target reduction of 30,000 hourly jobs by Jan. 1, two years early.
The final tally of buyouts and early retirements far exceeds early estimates and lays the groundwork for a sweeping restructuring of GM's U.S. manufacturing operations.
"It's fair to say we're coming very rapidly on the road back," said GM Chairman and CEO Rick Wagoner at a news conference at GM's Detroit headquarters.
At Delphi, another 12,600 union members have elected to retire early, paving the way for a radical restructuring of the parts maker's U.S. operations.
Wagoner said the buyouts and retirements at GM will cost about $3.8 billion in payments to departing employees and adjustments in pension liabilities. He said GM will take the charge when it releases second-quarter earnings next month.
In announcing the results of the epic attrition program, Wagoner said GM has increased its target for reducing its North American structural costs from $7 billion annually to $8 billion by the end of this year.
GM market share slides
GM lost $10.6 billion last year, sparking speculation on Wall Street that the company was heading toward bankruptcy.
A decades-long slide in U.S. market share, coupled with rising legacy costs, prompted GM in March to offer buyouts or retirement packages to all of its 113,000 U.S. hourly employees.
Delphi, a former unit of GM and its biggest parts supplier, later extended its own buyout and retirement offers to most of its 33,000 unionized workers.
Wagoner said Monday that the downsizing of the GM work force, coupled with buyouts and retirements at Delphi, could set the stage for a peaceful resolution of Delphi's restructuring process.
"It goes a long way toward addressing the issue of a future at Delphi that works for everybody," Wagoner said.
Delphi said Monday that 12,600 of its 24,000 UAW members have accepted retirement deals, but gave no details on how many other workers took buyouts. The company is also offering packages to 8,000 workers represented by other unions.
UAW support noted
The conclusion of GM's attrition program marks another milestone in the wrenching effort to turn around the automaker.
Last fall, GM struck a deal with the UAW that forced retired workers to pay a portion of their health care and required active workers to forgo a wage increase to help cover medical bills.
Wagoner credited the UAW leadership for its "steady support" of GM's moves to return its North American business to profit.
There was no immediate comment from the UAW on Monday.
Wagoner said the 35,000 departing workers include 33,800 represented by the UAW and another 1,200 represented by the International Union of Electrical Workers and Communication Workers of America.
Of the 35,000 who signed up, Wagoner said that 4,600 accepted cash buyouts that included relinquishing their health benefits.
When GM and the UAW agreed in March to the massive "accelerated attrition" plan, industry observers were unsure how the offers would be received by the rank and file. But questions about GM's future and Delphi's restructuring in bankruptcy court helped convince workers to take the money and run.
Buyouts open up options
"The ball really started rolling toward the end," said Bobby Millsap, who took early retirement after 27 years at GM's assembly plant in Oklahoma City.
GM closed the Oklahoma City plant, which made mid-size SUVs, in February. More than 2,200 hourly workers were transferred into the GM "jobs bank," where they continued to receive paychecks but had little hope of returning to their old jobs.
"With these packages, they can afford to get off the assembly line and do something they really want to do," Millsap said.
The exodus of workers should help GM drastically reduce the size of the jobs bank. At one point this year, the automaker was paying about 9,000 hourly workers to sit idle or do community service.
"The question is whether the buyouts are going to be enough to soak up most of the jobs bank," said David Healy, an analyst with Burnham Securities.
Wagoner declined to provide numbers, but said the number of workers in the jobs bank "will be dramatically reduced."
A bigger issue is whether GM can shrink its manufacturing base fast enough to keep up with its falling market share.
GM announced last year plans to close at least 12 plants and engineering centers by 2008.
Analysts predict the overall U.S. new-vehicle sales to sag in June, and GM to fare worse than other manufacturers. Merrill Lynch analyst John Murphy said Wednesday that GM's market share for the month will drop below 24 percent.
It's now a scramble
GM and Delphi will have to scramble to keep plants and assembly lines running by recalling laid-off workers, transferring workers from other plants and hiring temporary workers.
GM said about 9,000 workers have left the company and the remaining workers who took packages have departure dates scattered through the end of the year.
"We feel highly comfortable we can offer continued focus on great quality," Wagoner said.
Healy estimated the cost of a temporary employee at $19 an hour, compared to about $80-an-hour in wages, benefits and retirement costs for current workers. "That's a huge savings," he said.
GM shares closed at $27.75 Monday, up 78 cents.
You can reach Bill Vlasic at (313) 222-2152 or bvlasic@detnews.com.
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