GM seeks deal on buyout plan

GM seeks deal on buyout plan http://www.detnews.com/apps/pbcs.dll/article?AID=/20071218/AUTO01/712180337/1148
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 slowly.
"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.
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I wonder how GM can save on labor costs when they will be paying a 20 year old line worker and a 50 year old line worker, the same amount per hour, when doing the same job?
Instead of trying to lower costs by reducing labor costs, that only amount to around 20% of the build cost, they would be better off moving the their corporate headquarters to Japan and avoid paying the 45% federal corporate income tax.as does Toyota etal ;)

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