GM seeks deal on buyout plan
General Motors Corp., looking to slash costs quickly in a weakening U.S.
auto market, is pushing to cut a deal with the United Auto Workers on a
buyout program for thousands of veteran workers.
The automaker could begin rolling out offers before Christmas rather
than waiting until early next year as initially expected, according to
sources familiar with the negotiations.
GM wants to encourage more senior employees to leave the automaker so a
lower-paid, second-tier of workers can take their place, one of the key
concessions GM won in this year's national contract talks with the union.
GM is under intense pressure to generate savings amid slackening sales
of cars and trucks. GM's sales have tumbled 6 percent through November
in a slower overall U.S. auto market. Demand in 2008 is expected to be
as slow as or worse than this year.
But getting the buyouts in place is complicated by contract negotiations
with plant-level UAW locals, where details of the second-tier pay
system, among other issues, still have to be worked out.
"GM would prefer to have this wrapped up right now, but these things can
take time," said labor professor Harley Shaiken of the University of
California-Berkeley. "This was such a large shift that they are
proceeding more cautiously on a local level."
Under the two-tier wage system, pay levels will be determined by the
type of job workers have. Jobs considered core to building an automobile
will stay at the higher wage level, while so-called non-core jobs will
command about half the current average wage.
More than two months after reaching a national contract with the UAW, GM
has only a couple of local deals approved. Several local union
presidents interviewed recently said local talks are progressing, but
"I'm not going to talk about anything until we're getting close," said
Dwayne Humphries, shop chairman of UAW Local 276, representing the GM
assembly plant in Arlington, Texas.Ford Motor Co. and Chrysler LLC also
won two-tier pay agreements from the union and plan to offer buyouts to
make room for lower-paid workers. But Ford avoided the situation GM is
in by striking a national deal with the UAW that called for a set number
of lower-tier workers regardless of their job. Chrysler LLC settled on
details of its buyout program as part of the national talks, but also is
still working to define second-tier jobs.
GM, which lost $12 billion in 2005 and 2006, has said it must slash
labor costs to compete against leaner foreign-based rivals. The bulk of
savings to come out of the labor deal won't be realized until at least
2010. That's the soonest a union-run, company-funded trust to cover
retiree health care would take effect.
That makes reducing wages even more critical to for GM.
As many as 56,000 of GM's 74,500 blue-collar workers could retire by
2011, and many of their replacements would fall into the lower wage
tier. Under the contract, about 16,000 jobs would be considered non-core.
A new worker hired into a lower-tier job will cost GM $25.65 in combined
wages and benefits -- less than one-third of the $78.31 the automaker
currently spends. Workers will have the opportunity to move into the
higher paying jobs as they become available.
But even future workers who move into the richer wages will cost the
company far less than current employees since new hires will pay 15
percent of their health care costs while they're actively working,
instead of the current 5 percent. And GM will contribute $1 for each
hour worked into a 401(k) plan, rather than picking up costly medical
bills for future retirees.
"They want to get these things settled," said David Cole, chairman of
the Center for Automotive Research in Ann Arbor. "But these are
complicated agreements -- asking people to do thing quite different than
they way they have done things in the past."
The buyouts likely would be similar to those offered in 2006, when more
than 34,000 hourly workers left GM in exchange for packages ranging from
$35,000 to $140,000. GM would like to offer targeted buyouts, while the
union is pushing for an offer to be extended to all workers.
Of Detroit's automakers, GM has the most to gain from two-tier wages
because it has oldest work force, said Cole of the Center for Automotive
Research. After the 2006 buyouts, the average age of a GM hourly worker
dropped just one year to 50.