Thousands take buyouts at GM, Delphi

DETROIT: About 47,600 hourly workers have decided to leave General Motors and Delphi through buyout or early retirement offers, accelerating the distressed companies’ plans to cut costs by paring their work forces.

At GM, where about 35,000 people will depart, mostly through early retirements, chairman and CEO Rick Wagoner said he was surprised by the numbers.

But he said the number of takers will allow the Detroit company to reach its target reduction of 30,000 manufacturing jobs by January 1, two years before schedule.

Delphi said that about 12,600 employees represented by the United Auto Workers union took early retirement offers at the Troy-based automotive parts supplier, which filed for bankruptcy protection last October. Some Delphi workers also have an additional buyout offer on the table with deadlines that are more than a month away.

GM previously announced plans to cut its 1,13,000-person US hourly work force by 30,000, closing a dozen plants by ‘08.
“Over the past several months, we have accomplished a great deal in our strategy to reshape GM into a company that is more nimble, more global and built for long-term success,“ Mr Wagoner said on Monday.

The deadline for GM workers to file paperwork for the offers was Friday, but they have seven days to change their minds. Friday also was the deadline for workers at Delphi, GM’s former parts operation that is now a separate company, to file for early retirement incentives.

Delphi said that about 12,600 employees represented by the United Auto Workers union took early retirement offers at the Troy-based automotive parts supplier, which filed for bankruptcy protection last October. Some Delphi workers also have an additional buyout offer on the table with deadlines that are more than a month away.

Based on preliminary numbers from GM, about 4,600 employees accepted buyouts and about 30,400 chose to retire. It is expected that most will retire or leave the company by the end of the year, GM said.

GM offered buyouts of $140,000 for workers with at least 10 years of service, while those with less than 10 years would receive $70,000. The workers would cut nearly all ties with the company except for vested pension benefits. The automaker also offered an early retirement option to workers with at least 26 years of service.

Normally, employees can retire at 65 years of age or 30 years of service. Delphi workers were offered a similar early retirement incentive. But Delphi’s effort to buy out some employees still needs bankruptcy court approval. The nation’s largest automaker said it expects to save $5 bn in structural costs in ‘06, with a substantial portion coming due to the buyouts and retirements.

Mr Wagoner said the exodus will allow GM to dramatically reduce the number of workers in the “jobs bank”, where laid-off workers get most of their pay and benefits even when they’re not working. “That’s an important part of what we’re doing here,” he said.

Because so many people are leaving, both GM and Delphi will have to scramble to keep plants and assembly lines running by recalling laid-off workers, bringing in transfers from other plants and hiring temporary workers. “There will be this challenge to make sure there are enough workers in certain locations.

You can’t just move people around like chess pieces,” said Greg Gardner, spokesman for Harbour Consulting, a Troy company that tracks manufacturing productivity. GM officials said they will maintain quality at the plants, mainly because they’ve already had plenty of practice at such transitions.

Officials said that about 9,000 people have already left the company under the attrition offers. “We’ve managed through that quite well,” Mr Wagoner said, adding that the remaining workers who took the packages have departure dates that are scattered through the end of the year. “We feel highly comfortable we can offer continued focus on great quality,” he said.

But Gerald Meyers, former chairman of American Motors who now teaches at the University of Michigan, said the cuts initially will cause problems but eventually will be positive for both companies.

“It’s a manufacturing manager’s nightmare with all these people moving in and out,” said Mr Meyers, who predicted quality problems for Delphi and to a lesser degree, for GM, as the transition is made to a smaller work force. “It’ll take weeks before these people learn their jobs and before they find out how tired they’re going to get. It’ll show up in the quality of the product,” he said.

Delphi will lose so many workers that it will have trouble producing its products, said Rob Betts, president of a UAW local at a Delphi plant in Coopersville. “It could end up being dangerous, a threat to the business,” said Betts, who said skilled workers are being replaced by inexperienced people earning far less money.

Analysts say they don’t have good estimates on how much all the buyouts and retirements will cost GM. But the company had about $21 bn in cash back in March, said Robert Schulz, an industry analyst with Standard & Poor’s in New York.

The job cuts are an important first step toward GM’s long-term stability, but won’t turn around the company by themselves, said Erich Merkle, an analyst with IRN, an automotive consulting company in Grand Rapids. “The other side of the equation is the revenue side. They’ve got to do something to stabilise their sales and market share.

At the end of the day you still have to build products people will buy,” Merkle said. GM shares rose 78 cents, 2.9%, to close at $27.75 on the New York Stock Exchange.