GM Is Said to Propose New UAW Buyouts to Cut Costs
GM Is Said to Propose New UAW Buyouts to Cut Costs (Update2)
By Katie Merx and Jeff Green
May 14 (Bloomberg) — General Motors Corp., facing a probable bankruptcy filing by a June 1 deadline, is preparing a new buyout for United Auto Workers members to cut labor costs, people briefed on the plans said.
GM may propose a combination of cash and car vouchers similar to a program earlier this year, said the people, who were told of the offers yesterday at meetings for local leaders with UAW Vice President Cal Rapson in Cleveland. They asked not to be identified because the sessions are private.
The company said April 27 that it expects to trim U.S. hourly employment to 40,000 in 2010 from about 61,000 last year. About 7,000 workers left this year under the earlier offer.
“This is a way of helping to get the deal ratified,” said Kristin Dziczek, director of the labor and industry group at the Center for Automotive Research in Ann Arbor, Michigan. “They would want to ratify a deal because these are their new owners. It purports for a more orderly bankruptcy if the UAW is on board before they file.”
Under the biggest U.S. automaker’s restructuring plan, a union-run fund for retiree health care would get an equity stake of as much as 39 percent in the reorganized company. The U.S. would control at least 50 percent, unsecured bondholders would get 10 percent and existing shareholders would get 1 percent.
Sherrie Childers-Arb, a GM spokeswoman, declined to comment on reports of a buyout and retirement offer because the negotiations are private. A UAW spokesman, Roger Kerson, didn’t immediately respond to a request for comment.
Chief Executive Officer Fritz Henderson said today that a GM bankruptcy “is probable.” The Detroit-based automaker is trying to shave operating costs and shrink debt and union- retiree obligations by $44 billion. GM is surviving on $15.4 billion in U.S. government loans and is under a federal deadline to restructure out of court or file for bankruptcy.
GM fell 6 cents, or 5 percent, to $1.15 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have declined 64 percent this year.
The latest buyout offer would be GM’s fourth since 2005, with about 67,500 union jobs eliminated under the earlier programs. The initial 2009 buyout consisted of a $25,000 voucher toward a new auto and $20,000 in cash.
GM is also trimming salaried positions, with 14 percent already eliminated this year. The automaker plans for a new set of cuts this month that may be similar in scope, people familiar with the matter said earlier this month.
The company said in February that it would eliminate 10,000 of its 73,000 salaried positions, including about 3,400 of the 29,650 in the U.S. The employees do jobs such as engineering, marketing and design for a fixed, twice-monthly paycheck.
On May 1, GM pared salaries by 10 percent for U.S. executives and by 3 percent to 7 percent for most other white- collar employees. The ranks of top executives will shrink to 1,100 from 1,300, the automaker said in an April 27 report.