General Motors has announced that around 35,000 hourly employees will take early retirement or buyouts, allowing the automaker to reach its target of 30,000 manufacturing job cuts about two years early.
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Coupled with the hourly workforce reduction of 6,500 in 2005 and estimated replacements, including Delphi returnees, GM expects to reach its target of reducing 30,000 manufacturing jobs by 1 January, 2007 , about two years ahead of the previously announced schedule, it said in a statement.
“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,” said chairman and chief executive officer Rick Wagoner in a statement.
The Associated Press (AP) said a further 12,600 workers would also abandon key GM supplier Delphi and that Wagoner reportedly said he was surprised by the numbers jumping ship.
The news agency noted that 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 Delphi workers.
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By GlobalDataDelphi reportedly said on Monday 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 said that preliminary numbers show approximately 4,600 of the participating employees accepted buyouts and approximately 30,400 chose to retire. It is expected that most will retire or leave the company by the end of the year.
GM added that its JOBS Bank will be substantially reduced as employees from the bank retire, take a buy-out or fill openings created by the attrition programme.
GM reportedly offered buyouts of $US140,000 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 the supplier’s effort to buy out some employees still needs bankruptcy court approval.
As a result of the success of the accelerated attrition programme, GM said it is again increasing its targeted reduction in structural costs in North America to at least $8 billion from $7 billion on an annual running rate basis by the end of 2006.
Approximately $5 billion in savings is expected to be realised in 2006. The additional cost reduction of at least $1 billion, largely cash savings, will bring expected total annual cash savings from structural cost reductions to $5 billion.
GM expects to take a net after-tax charge currently estimated in the range of $3.8 billion related to the attrition programme, primarily for payments to employees.
The Associated Press noted that, 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,” Greg Gardner, spokesman for Harbour Consulting, a Troy company that tracks manufacturing productivity, told the news agency.
GM officials reportedly said they would maintain quality at the plants, mainly because they’ve already had plenty of practice at such transitions. They added that about 9,000 people already have left the company under the attrition offers.
Gerald Meyers, former chairman of American Motors who now teaches at the University of Michigan, told AP 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 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 told The Associated Press.
Delphi will lose so many workers that it will have trouble producing its products, claimed Rob Betts, president of a UAW branch 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 reportedly say they don’t have good estimates on how much all the buyouts and retirements will cost GM. But the company had about $21 billion in cash back in March, Robert Schulz, an industry analyst with Standard & Poor’s in New York, told the news agency.
The job cuts are an important first step toward GM’s long-term stability, but won’t turn the company around by themselves, Erich Merkle, an analyst with IRN, an automotive consulting company in Grand Rapids, said.
“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 told The Associated Press.
