GM seals union deal to speed worker retirement

Himanshu Patel, an auto analyst with JPMorgan, said GM will likely pay around $2 billion for the Delphi buyouts based on recent financial filings, while Merrill Lynch analyst John Murphy said GM will probably pay “well in excess of $1 billion” for its own buyouts.

Several analysts questioned how much GM and Delphi will save. Most workers that retire will get full benefits, which doesn’t relieve GM’s sizable pension obligations, Goldman Sachs analyst Robert Barry said in a note to investors. Barry added that savings gained from the retirement of younger workers will be offset by GM’s assumption of Delphi retiree benefits.

Analysts said it’s also unclear what will happen to the bulk of Delphi’s 34,000 hourly workers. Delphi remains in negotiations with GM and its unions to lower its labor costs, which it puts at $75 an hour in wages and benefits. Delphi has threatened to ask a bankruptcy judge to cancel its union contracts if it fails to settle by March 30. If the judge does cancel those contracts, the unions could call a strike that would cripple Delphi and GM.

“With a looming strike, they had to do something, but how they’re going to address plant closures for Delphi and remaining workers’ salaries are the two loose ends here,” said Rebecca Lindland, an auto analyst with the consulting firm Global Insight.

Lindland added she’s pessimistic about the number of people who will opt for the buyouts, especially younger workers who have no other health insurance. Some older workers also might not be persuaded, she said.

“I feel like people are going to look and say, ’Can I give up my job for $35,000?”’ Lindland said.

The Delphi plan must be approved by the U.S. Bankruptcy Court. Delphi said it will ask a judge to consider the plan April 7. GM’s plan doesn’t require approval, and Flores said retirements could begin as early as June 1. Workers will have up to 52 days to decide whether to take the buyouts once they learn details in plant meetings.

Detroit-based GM said the plan will move it toward its goal of cutting 30,000 hourly jobs by 2008. GM has slightly more than 113,000 hourly workers companywide, but only UAW-represented workers are eligible for now, Flores said. The automaker is negotiating with the International Union of Electronic Workers-Communications Workers of America on a similar deal. Salaried workers won’t be getting the buyout option, Flores added.

“We said we’d be working with UAW leadership to develop an accelerated attrition program that would help us achieve needed cost reductions as rapidly as possible, while at the same time responding to the needs of our employees,” GM Chairman and CEO Rick Wagoner said in a statement. “We are pleased that this agreement will help fulfill that important objective.”

In a memo sent to local union leaders, UAW President Ron Gettelfinger and Vice President Richard Shoemaker said they will ask the bankruptcy court to approve the Delphi plan.

“Working out this agreement required an inordinate amount of time and patience due to the complexities posed by Delphi’s bankruptcy filing,” Gettelfinger and Shoemaker said in a statement.

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