Response to GM offer put at 20,000

More taking buyout than expected

May 25, 2006|By THE DETROIT NEWS

DETROIT -- More than 20,000 U.S. factory workers at General Motors Corp. have accepted buyout offers, surpassing the automaker's internal target with a month to go before the deadline, according to people familiar with the situation.

The stronger-than-expected response means GM is well on its way to reaching and eventually exceeding its goal of eliminating 30,000 U.S. hourly jobs by the end of 2008 - a central piece of its North American restructuring plan.

The automaker, which made the offers to all 113,000 of its U.S. hourly workers in one of the biggest buyout programs in corporate history, had expected 20,000 employees to come forward by the June 23 deadline, the sources said.

Though it has surpassed the goal, GM will continue to offer buyouts to workers who sign up by the deadline. Under an agreement with the United Auto Workers, there is no maximum number of buyouts that GM can accept. Sources say the automaker plans to take as many as it can get.

Yesterday, GM's stock price rose 8 percent, to $26.51, after Merrill Lynch upgraded the automaker from "neutral" to "buy" in a report that expressed optimism about the buyout program's early returns.

Merrill Lynch - which based its call on a weeks-old UAW update that 12,400 GM workers had accepted buyouts - estimates that GM will get 30,000 takers before the deadline.

"That would represent a significant acceleration in GM's restructuring plan," said Merrill Lynch's John Murphy in the report. Citing savings from the buyouts, he raised his estimate of GM's 2007 profit to $4.10 a share from $1.90. He also raised the shares' target price to $37.

GM, which lost $10.6 billion last year after a steep drop in SUV sales and steady market share losses to Asian rivals, could use the boost. The company is implementing a sweeping restructuring of its North American auto business that aims to close or downsize 12 plants by 2008 and cut $7 billion in costs by next year.

But the process is slow and Wall Street is growing impatient. The threat of a huge strike at its largest supplier, Delphi Corp., is not helping. Nor is an investigation into the company's accounting practices, bankruptcy speculation and a recent spike in gas prices, which could wreck sales of GM's profitable SUVs and pickups.

In March, GM and the UAW reached a deal to offer buyouts to thousands of highly paid union workers at the automaker and Delphi, the bankrupt auto-parts maker spun off from GM in 1999, to help the struggling companies pare their payrolls and become more competitive.

The "accelerated attrition" plan offers $35,000 and full retirement benefits to workers at both companies with 30 years or more of service and a full retirement to workers with 27 years or more who leave now. GM workers with less than 27 years but more than 10 may receive a one-time payment of $140,000 to walk away and sever all ties, and those with less than 10 years can take $70,000 to leave and forgo benefits.

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