GM extends employee-discount pricing

Incentive applies to '05 models, some of 2006

it ends Sept. 30

August 26, 2005|By Jim Mateja and Rick Popely | Jim Mateja and Rick Popely,CHICAGO TRIBUNE

CHICAGO - General Motors, creators of employee pricing for everyone, has again extended the offer after another ratings service downgraded its debt to junk status and while talks continue with the United Auto Workers on concessions to ease its health care burden.

"GM came up with a clever counter-move by tempering the bad news on Wednesday that Moody's had downgraded its bonds to junk status," said George Magliano, automotive research director for Global Insight, a forecasting firm in Lexington, Mass.

GM will now offer employee pricing through Sept. 30 on 2005 models and add some 2006 models to the program.

The incentive was to have expired Sept. 5 in favor of value pricing on its 2006 models, which would close the gap between the sticker and actual price with the goal of eliminating the need for hefty incentives.

"I don't know about GM, but I have more confidence in employee pricing than value pricing, because value pricing means low price and employee pricing means low price and no hassle, no haggle and attracts more people," said James M. Hossack, consultant with AutoPacific Inc.

He added that including 2006 models will make up for a lack of 2005 models, which have depleted by the incentive that's been offered since June.

"Based on our surveys, I would suspect they got no connection with consumers on the value pricing message," said Art Spinella, general manager of CNW Marketing Research. "The only alternative they have is to say that employee pricing is now the [manufacturer's suggested retail price] and get it over with. They need to offer their best, Wal-Mart-style low price all the time."

The extension of value pricing also takes the spotlight off continuing talks between the automakers and United Auto Workers over union members assuming a greater share of health-care costs.

That GM and the union would not comment on what progress, if any, has been made was viewed as good news by observers.

"When it's quiet it's always good because that means the two are working together; there might be concessions before the '07 contract talks," Magliano said.

News reports that UAW Vice President Richard Shoemaker told local leaders at a meeting in Chicago that the union might help GM on health care costs sparked speculation that an agreement might be reached soon.

A shop committeeman who asked to remain nameless said Shoemaker didn't give local leaders any specifics.

"He's saying that they recognize GM has some problems, and they're investigating it. He's not going to say anything more until he's ready," said the committeeman. "I don't think he's going to jeopardize any negotiations by talking now."

UAW members, he added, expect they will have to pay more for health care. The question, he said, is how much more that will be.

GM's North American auto operations lost $2.5 billion in the first half of the year, and the company says it will close an unspecified number of plants over the next three years and eliminate 25,000 union jobs, mainly through attrition.

Whatever the union's health care concessions, they are "not likely to materially close the gap between what salaried employees and hourly employees pay," said Brett Hoselton, senior auto analyst at KeyBanc Capital Markets.

GM says union workers pay 7 percent of their health care and salaried workers pay 27 percent.

Hoselton said health care isn't the only thing on the table.

He said he believes the talks include how to bail out GM's largest parts supplier, Delphi Corp., which GM spun off in 1999, and keep as many UAW members employed as possible.

He predicts that Delphi employees will be offered three options: Take an early retirement buyout, take a lump-sum payment and a lower wage to stay at Delphi or "flow back" to a GM job.

In May Ford dealt with a similar situation when it agreed to take over 24 plants owned by Visteon Corp., its former parts operation. About 17,000 UAW members who work at Visteon plants are Ford employees. Ford plans to sell many of the plants and offer early retirement to as many as 5,000 of the workers.

GM employs 110,000 UAW members, and about 6,000 retire or quit annually.

Hoselton sees GM trying to accelerate retirements with buyouts to create the room for the Delphi "flow back" and relieve some of the supplier's financial burden.

The talks with GM are taking so long because of the scope of the discussions - involving thousands of workers - and because any decisions will set a pattern for Ford and the Chrysler Group, Hoselton said. He predicts September is the earliest anything can happen.

The Chicago Tribune is a Tribune Publishing newspaper.

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