General Motors Corp., awash in $10 billion in red ink, took its first step back from the brink of bankruptcy yesterday when it offered buyouts to its entire hourly work force of 113,000.
The bold move, which includes retirement offers for an additional 13,000 workers at bankrupt Delphi Corp., GM's biggest supplier, is the latest retreat by the world's largest automaker.
GM employed nearly 500,000 union workers in the United States 20 years ago, when its market share was 40 percent, but its share has fallen to 25 percent this year.
So, this is perhaps the company's biggest acknowledgement that it is no longer the force it once was in the auto industry. Toyota Motor Corp. sits on GM's rear bumper, ready to overtake the Detroit-based automaker in worldwide sales as early as this year.
The buyouts are being offered less than two months after GM announced it was investing $118 million in its Allison Transmission plant in northeastern Baltimore County to manufacture hybrid light-truck transmissions. On Feb. 1, GM Chairman Rick Wagoner went to the facility in White Marsh to make the announcement and said the expansion would add up to 87 jobs. The plant currently employs about 440 people.
Those expansion plans are still on track, but GM risks losing skilled workers there to the buyouts.
GM spokeswoman Katie McBride said yesterday that there is language in the agreement between the company and the union which allows them to address a possible shortage of workers. She declined to explain what the options might be.
Calls to United Auto Workers Local 239, which represents hourly workers at the White Marsh plant, were not returned yesterday.
The move also signals that the days of guaranteed, high-paying auto jobs that helped build the Midwest's rock-solid middle class over several decades is nearing a tumultuous end. Thousands of such jobs will be replaced with new ones that pay a fraction of current wages, as GM and other domestic automakers adjust to smaller roles in a new global economy.
Attrition too slow
"[GM] has too many plants and too many people, both white and blue collar," said Burnham Securities analyst David Healy. "The attrition of its labor force has been running from 4 to 6 percent a year, and that's not enough.
"Its overhead structure supports a company that has a 30 percent share of the market when GM has a 25 percent share and nearly 25 percent of its [manufacturing] capacity is not working," Healy said.
That's why GM is enticing UAW members to retire with buyouts of $35,000 to $140,000, depending on the employee's age and length of service.
After posting a $10.6 billion loss last year, the bulk of it in North America, GM is racing to trim at least 30,000 union jobs by 2008 in a downsizing that includes closing nine plants and eliminating about 1 million units of idle production capacity.
The situation is made more tenuous by the Delphi bankruptcy, a move that still has the potential to push GM itself into bankruptcy.
Delphi, which was once part of GM, warned yesterday that it still plans to file motions in bankruptcy court March 31 to void its union contracts if workers don't accept lower wages and benefits. Talks continued yesterday between Delphi and its unions.
UAW members at Delphi make $65 an hour in wages and benefits, the same as GM workers. Delphi has said it wants to slash that to less than $25.
The unions have threatened to strike if Delphi files to void their contracts. A strike could halt GM's production within days because it depends on Delphi for critical parts for its North American-built models. A strike that lasts a few weeks could spell doom for GM.
This makes acceptance of buyouts all the more urgent.
About 36,000 union workers at GM have 30 years of service and are eligible to retire. They would receive a $35,000 incentive to do so. About 27,000 more would qualify for full pension benefits under the early retirement offers, so GM could easily eliminate the 30,000 jobs it wants to cut.
The maximum buyout of $140,000 would go to workers with more than 10 years' experience who agree to give up all retirement benefits. Such legacy costs have been another burr under the automaker's saddle.
GM wouldn't estimate how many workers might take the deal. It recently jettisoned its plan to eliminate the 30,000 jobs mainly through attrition because it realized it didn't have time for that during weeks of complex negotiations with the UAW and Delphi which resulted in yesterday's deal.
GM officials will visit each plant and explain the different buyout options to eligible workers, McBride said. She did not know when they would go to White Marsh. Workers will have 45 days from the date of the visit to accept a buyout, McBride said, and those who sign up will have an additional seven days to change their minds.