GM, UAW & Delphi Come To Terms On Bail Out

[Guest Josh]

GM offers workers up to $140K to leave

NEW YORK (CNNMoney.com) - General Motors is offering hourly workers as much as $140,000 each to leave the company as the troubled automaker extends its push to cut labor costs and put an end to billions of dollars in losses.

GM (Research) announced an agreement with the United Auto Workers union Wednesday, although it did not give the details of the offer extended to all 113,000 U.S. hourly employees.

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But a person familiar with terms of the offer said that UAW members with 10 years or more service with the automaker will get $140,000 if they agree to forsake the retiree health care coverage that has become a crippling burden for GM. The workers will keep their accrued pension benefits, though.

Those with less than 10 years service will get $70,000 if they leave without the health care coverage.

The company also announced a much anticipated agreement Wednesday with bankrupt auto parts maker Delphi and the UAW that is seen as a key to avoiding a crippling strike at the parts supplier. GM said hourly employees eligible for retirement are being offered $35,000 to retire early.

GM also will offer Delphi employees with 30 years of service the same $35,000 to retire. And GM is also offering jobs at GM to 5,000 Delphi employees as a way to help its former parts unit cut costs.

GM lost $10.6 billion in 2005 and its executives have not said when they expect it to return to profitability. They have said the agreement with Delphi as well as an agreement with the UAW to cut its own labor costs were keys to return to the black.

Shares of GM rose about 1 percent in afternoon trading, but some industry analysts said GM's moves were not enough to change their view of the stock.

"It's a major step forward but it's certainly no where near all what they have to accomplish to turn North America around," said David Healy at Burnham Securities, who does not have a formal rating on the stock.

Full Story: http://money.cnn.com/2006/03/22/news/compa...dex.htm?cnn=yes

I was right in saying the deal would be announced early in the week. Well, it was actually middle but in the first half of Wednesday.

[Guest Josh]

5,000 UAW-represented employees will have the opportunity to flowback to GM through the end of September 2007.

The September 2007 timeframe scares me. That's the time in which the current contract expires. Meaning many of these workers will probably be working on borrowed time until the new contact is negotiated which will result in extreme downsizing at GMNA which will include these 5k flowbacks.

[SimonDavid]

Back of the envelope -

13,000 potential early retirees x 35,000 incentive that some of them may be eligible for = 455 million maximum cash outlay.

So where does the 3 to 5 billion bailout cost come from?

Is this figure maybe the total pension liability for all those retirees? ie it's not an immediate cash outlay, it just gets added to the GM pensions fund's existing 100 billion liabilities.

If that's the case then GM doesn't come out of this too bad.

[Newbiewar]

Back of the envelope -

13,000 potential early retirees x 35,000 incentive that some of them may be eligible for = 455 million maximum cash outlay.

So where does the 3 to 5 billion bailout cost come from?

Is this figure maybe the total pension liability for all those retirees? ie it's not an immediate cash outlay, it just gets added to the GM pensions fund's existing 100 billion liabilities.

If that's the case then GM doesn't come out of this too bad.

the 3-5 billion comes from the individuals that are already retired...

they used to work for GM before they spun delphi off...

[Shantanu]

$$$ for the workers, and $$$ for Delphi, but a weak deal from GM's standpoint.

Rick Wagoner should be grabbed by the balls and thrown off the top of the GM building.

I think he just put the final nails in GM's coffin. Where's all this money going to come from? And no clear plan on how to enhance profitability.

Edited March 22, 2006 by Shantanu

[Newbiewar]

$$$ for the workers, and $$$ for Delphi, but a weak deal from GM's standpoint.

Rick Wagoner should be grabbed by the balls and thrown off the top of the GM building.

I think he just put the final nails in GM's coffin.  Where's all this money going to come from?  And no clear plan on how to enhance profitability.

honnestly... i think its a fantastic deal... if Delphi were to strike for more then a few days, GM would burn through much more then that bail out amount...

[evok]

$$$ for the workers, and $$$ for Delphi, but a weak deal from GM's standpoint.

Rick Wagoner should be grabbed by the balls and thrown off the top of the GM building.

I think he just put the final nails in GM's coffin.  Where's all this money going to come from?  And no clear plan on how to enhance profitability.

Either this or a show down - GM just raised about 3 billion in the last 6 months.

I am also willing to bet GM will receive a % of DPH stock as a creditor in the restructured company that will be transfered to the retirement fund.

This is probably best short term solution until the long term Sept 07 resolution can take place.

[Guest Josh]

Indepth look here as well

http://uaw.org/delphi/2006_Attrition_Program_highlights.pdf

[SimonDavid]

$$$ for the workers, and $$$ for Delphi, but a weak deal from GM's standpoint.

Rick Wagoner should be grabbed by the balls and thrown off the top of the GM building.

I think he just put the final nails in GM's coffin.  Where's all this money going to come from?  And no clear plan on how to enhance profitability.

Looking at the summary, that $140 k or $70k is for the Delphi or GM employee to sever all ties with GM ie forfeit all retirement and health care entitlements except vested pension rights. So it's really just cashing out existing obligations - GM's pension and health care liabilities should come down when people take it up.

Annual cost of employing an hourly is probably about $70k to $100k when you include all the on costs so this investment will only have a 1 to 2 year payback.

I think GMs weakness is turning into a strength - people look at the financial weakness of the company and conclude that it's not a good idea to be a GM retiree so they'll take a relatively low buyout offer.

[jbartley]

honnestly... i think its a fantastic deal... if Delphi were to strike for more then a few days, GM would burn through much more then that bail out amount...

I agree, GM has to think big picture here. With multiple key product launches, this is their best bet until 2007.

I think the plan is as good as at gets right now.

[Ghost Dog]

Hmm Delphi 33k Employees

13 k Eligible for Buyout

5 K Flowback

Delphi Gets its workforce Cut by more then Half.

Well we'll see what the people choose.

Still a chance it can Go bad. The Terms of Employment of the 15k remaining still seems up in the air.

[I hope GMRULES again]

I agree, GM has to think big picture here.  With multiple key product launches, this is their best bet until 2007.

I think the plan is as good as at gets right now.

I'm with you guys too.

[Angry Dad]

Considering that each job "created" at the Georgia Kia factory will cost you the taxpayer $160,000, (yep even though Georgia makes the offer it's comes out of every taxpayer's pocket one way or another), this is not a bad deal by GM.

On the other hand the public will get fed and eat a line of bull given to them by the press.

[Ghost Dog]

Local reaction here seems positive. They had coverage from the Powertrain Plant, and Delphi in Lockport on the news. Those they talked to seemed happy.

[Ghost Dog]

Heavy lifting remains in Delphi-UAW talks

http://today.reuters.com/investing/finance...ELPHI-LABOR.XML

Bankrupt auto parts supplier Delphi Corp. (DPHIQ.PK: Quote, Profile, Research) and its major union may have negotiated a sweeping buyout for blue-collar workers, but a full labor settlement still faces major obstacles, industry analysts said on Wednesday.

The risk for at least some kind of disruption to production remains fairly high, with Wednesday's announcements leaving unresolved potentially contentious questions about wage rates, benefits, pensions and plant closings, these analysts said.

[RJB]

Why don't they throw some salaried workers in the pot too. I work with a lot of salried guys who are itching to leave but no one has made them any offers yet. They are puzzled to say the least.

[Guest Josh]

Honestly? GM can walk in, pull them out of the office, take their keys and say "thanks, but no thanks."

The sad part of the salaried guys is there is not a contact legally binding these companies to them.

[VenSeattle]

Why don't they throw some salaried workers in the pot too. I work with a lot of salried guys who are itching to leave but no one has made them any offers yet. They are puzzled to say the least.

GM has been cutting white collar jobs for awhile now... GM can't cut much more:

http://www.usatoday.com/money/autos/2005-03-21-gm-cuts_x.htm

Since 2000, GM has reduced its non-union salaried workforce to about 38,000 at the end of 2004 from about 44,000 at the end of 2000.

While not confirming a target for 2005, spokesman Robert Herta said "2005 will be no different" from past years when the company reduced its workforce by 1,000 to 2,000 workers.

In the past five years, GM has used voluntary buyouts to reduce its salaried head count as much as 10%.

[CaddyXLR-V]

Honestly? GM can walk in, pull them out of the office, take their keys and say "thanks, but no thanks."

The sad part of the salaried guys is there is not a contact legally binding these companies to them.

I really dont see how that is sad. I find it sad that the union workers have it so much better and think they are too good to accept any less.

I dont have a contract with my employer(Wells Fargo), but I love working there.

[thegriffon]

Looking at the summary, that $140 k or $70k is for the Delphi or GM employee to sever all ties with GM ie forfeit all retirement and health care entitlements except vested pension rights.  So it's really just cashing out existing obligations - GM's pension and health care liabilities should come down when people take it up.

Annual cost of employing an hourly is probably about $70k to $100k when you include all the on costs so this investment will only have a 1 to 2 year payback. 

I think GMs weakness is turning into a strength - people look at the financial weakness of the company and conclude that it's not a good idea to be a GM retiree so they'll take a relatively low buyout offer.

And go work for someone else.

[ellives]

Well this point is a quandry. On the one hand people are concerned these jobs will be gone and not replaced. On the other hand I'm always thinking these former employees will take their skills and knowledge and go work for a competitor.

I've seen this "employee buyout" arrangement used many times over the years in the high tech sector. Particularly I remember DEC back in the early 90's doing it and paying big money for these employees to leave. Unfortunately, the people who took the buyout were the brightest and smartest and knew they could easily find jobs elsewhere. The one's that did NOT take the buyout were the ones who couldn't find another job for various reasons, but mostly because they were low quality empoyees. This I believe led to the ultimate demise of the company.

Hopefully the same scenario doesn't play out for GM.

And go work for someone else.

[evok]

Why don't they throw some salaried workers in the pot too.

It should happen next week!

[evok]

It should happen next week!

Reuter is now reporting - it will happen next week.

[enzl]

Isn't this agreement only half the story anyway?

The agreement on wages for Delphi people going forward has not been settled at all, correct?

[evok]

Isn't this agreement only half the story anyway?

The agreement on wages for Delphi people going forward has not been settled at all, correct?

True but let us look at the numbers:

DPH has 24,000 UAW employees.

GM is offering buy outs to app. 13,000 DPH/UAW employees.

5,000 of the 24,000 have the opportunity to flow back to GM.

DPH appears to be preparing itself to be a lot smaller in the US when it emerges from BK.

I am sure that once the current round of employees excepts the buyouts, it is possible that DPH will negotiate a third tier to their current pay structure for possible future new hires. The membership that is left may not balk if it does not affect them directly.

[FUTURE_OF_GM]

No. 1 automaker's shortfall equals $36,000 a minute as auto operations falter. (more)

Now we're microanalyzing minutes????

I guess it's suspenseful build up. The press probably has a bet going as to who can guess the minute in which GM goes under. (THanks to them among other things)

[Ghost Dog]

I'm hearing complaints today that after tax the 35k equals 14k. Any chance they could stick the 35k in an IRA pre tax?

[Ghost Dog]

Hmm the numbers After Tax that I mentioned were wrong.

21 K

Some Local Reaction.

http://www.buffalonews.com/editorial/20060323/1030897.asp

[ehaase]

I'm hearing complaints today that after tax the 35k equals 14k.  Any chance they could stick the 35k in an IRA pre tax?

No

[Ghost Dog]

So what happens if they throw a party and nobody comes.

[RJB]

I work here at GM and the rumors of "Black Tuesday" have been going around this whole week, but nobody is saying anything. Pretty tight lipped around here. It has me worried to say the least. Its sad when you don't know whats going on within your own company. Anybody know of any jobs?...'Gulp!!'

[evok]

So what happens if they throw a party and nobody comes.

That is why you cast a net as large as they did.

[Newbiewar]

does this mean no strike for delphi?