GM, Delphi to Offer Buyouts to 125,000 Employees Under Deal With UAW

DETROIT March 23, 2006; Dee-Ann Durbin writing for the AP reported that General Motors Corp. is suddenly much closer to its goal of cutting 30,000 U.S. hourly jobs by 2008.

The automaker and its major supplier, Delphi Corp., said Wednesday they plan to offer buyouts to more than 125,000 hourly workers under an agreement with the United Auto Workers. Workers are expected to start leaving GM by June 1.

Around 113,000 GM workers will be eligible for early-retirement incentives or buyouts of between $35,000 and $140,000 depending on their years of service and whether they want to keep health care and other benefits. At Delphi, GM's former parts division and largest supplier, 13,000 U.S. hourly workers will be eligible for a lump sum payment of $35,000 to retire. Also, up to 5,000 Delphi workers will be eligible to return to GM.

The buyout is one of the largest in recent memory, said Harley Shaiken, a professor and labor expert at the University of California, Berkeley.

"It's going to have significant impact on the companies and on the industry. It is a painful option for the union but it is the best option of those available," Shaiken said.

The number of workers covered by the GM-Delphi buyout offer is enormous, but not unprecedented. For example, in 2003, Verizon Communications Inc. made a buyout offer to 152,000 workers, about half of them unionized technicians and call center operators and the other half non-union managers. About 21,600 of those employees accepted the deal, nearly double what the company had sought.

While the deal with the UAW would not be offered to as many workers, the dollars being offered are much richer than in most past buyouts, said John Challenger of outplacement firm Challenger, Gray & Christmas Inc.

"It's unparalleled in terms of the potential for the amount of money that will be paid out to blue collar workers," he said.

Gregory Sutton, a Delphi worker in Athens, Ala., said he was "happy as a lark" with the plan.

"To the people that's got close to retirement, it's a fairly good deal," said Sutton, 58. "I've got 27 1/2 years and I'm going to jump on it just as soon as I can jump on it. Course, the younger people, they're the ones who are probably going to suffer the most."

Others said the agreement leaves open many questions, including what will happen to the bulk of Delphi's 34,000 hourly workers. Delphi remains in negotiations with GM and its unions to lower its labor costs, which it puts at $75 an hour in wages and benefits. Delphi has threatened to ask a bankruptcy judge to cancel its union contracts if it fails to reach an agreement by March 30. If the judge does cancel those contracts, the unions could call a strike that would cripple Delphi and GM.

"We're worried," said Lonnie Perez, a machine operator at a Delphi plant in Saginaw. Perez, 40, was hired in 2000, the year after Delphi spun off from GM. Workers who started before the spinoff will get first priority to return to GM, "so that would leave us out nowhere," he said.

The buyout deal comes at a critical time for GM, which increased by $2 billion its reported 2005 loss to $10.6 billion last week. The world's largest automaker has been losing U.S. market share to Asian automakers and is saddled with labor agreements that make it difficult to close plants or cut workers.

The plan also is crucial for Delphi, the largest U.S. auto parts supplier, which is reorganizing in bankruptcy court after filing for Chapter 11 protection in October. The plan is a bitter pill for the UAW, which also recently agreed to unprecedented cuts in retiree health care at GM and Ford Motor Co.

"There's a cushion but it doesn't prevent the fall," Shaiken said. "It eases the pain but it's not the same as having the stability of a successful company."

In a memo sent to local union leaders, UAW President Ron Gettelfinger and Vice President Richard Shoemaker said they will ask the bankruptcy court to approve the Delphi plan.

"Working out this agreement required an inordinate amount of time and patience due to the complexities posed by Delphi's bankruptcy filing," Gettelfinger and Shoemaker said.

Under the plan, GM would pay for the Delphi early-retirement incentives and assume some post-retirement benefits for Delphi employees who go back to work for GM. GM spokesman Dan Flores said GM didn't yet know the full cost of the plans, since it's unclear how many workers will participate.

Himanshu Patel, an auto analyst with JPMorgan, said GM will likely pay around $2 billion for the Delphi buyouts based on recent financial filings, while Merrill Lynch analyst John Murphy estimated GM will spend "well in excess of $1 billion" on its own buyout plan.

Several analysts questioned how much GM can save, saying it will get near-term relief by cutting jobs but will add to its pension obligations. The company already has 2.5 retirees for every active worker.

Most workers who retire will get full benefits, which doesn't relieve GM's sizable pension obligations, Goldman Sachs analyst Robert Barry said in a note to investors. Barry added that savings gained from the retirement of younger workers could be offset by GM's assumption of Delphi retiree benefits.

The Delphi plan must be approved by the U.S. Bankruptcy Court. Delphi said it will ask a judge to consider the plan April 7. GM's plan doesn't require approval, and Flores said retirements could begin as early as June 1. Workers will have up to 52 days to decide whether to take the buyouts once they learn details in plant meetings.

Detroit-based GM said the plan will move it toward its goal of closing 12 facilities by 2008. GM has slightly more than 113,000 workers, but only UAW-represented workers are eligible for now, Flores said. The automaker is negotiating with its other unions -- the International Union of Electronic Workers-Communications Workers of America and the United Steelworkers -- on a similar deal. Salaried workers won't get the buyout option, Flores added.

Associated Press Writer Desiree Hunter in Montgomery, Ala., contributed to this report.

Delphi Corp.: http://www.delphi.com

General Motors Corp.: http://www.gm.com

United Auto Workers: http://www.uaw.org