DETROIT – General Motors Corp. (GM) and auto parts supplier Delphi Corp. announced deals with the United Auto Workers on Wednesday that would help the struggling companies cut labor costs by offering early-retirement buyouts to 113,000 U.S. hourly workers.
The deal comes at a critical time for GM, which increased by $2 billion its reported 2005 loss to $10.6 billion last week. The world's largest automaker has been losing U.S. market share but is saddled with labor agreements that make it difficult to close plants or cut workers. The plan also is crucial for Delphi, the largest U.S. auto parts supplier, which is reorganizing in bankruptcy court after filing for Chapter 11 protection in October.
About 100,000 GM workers will be eligible for payouts of between $35,000 and $140,000 depending on their years of service. At Delphi, up to 5,000 workers will be eligible to return to GM, Delphi's former parent company, while 13,000 U.S. hourly workers will be eligible for a lump sum payment of up to $35,000 to retire. Delphi has about 34,000 U.S. hourly workers overall.
The Delphi plan must be approved by the bankruptcy court. GM's plan doesn't require approval, and company spokesman Dan 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.
GM said the plan will move it toward its goal of cutting 30,000 hourly jobs by 2008. Salaried workers won't be eligible for the early-retirement offers.
"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.
Under the plan, GM would pay for the Delphi early-retirement incentives and would assume some post-retirement benefits for Delphi employees who go back to work for GM. Flores said GM didn't yet know the full cost of the plans, since it's unclear how many workers will participate, but the company already has taken a $3.6 billion charge for Delphi-related expenses.
GM shares rose 33 cents to $22.33 in afternoon trading on the New York Stock Exchange.
Detroit-based GM has a total of 113,000 hourly workers, 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 for those workers.
Delphi said it will ask U.S. Bankruptcy Court to consider the plan April 7. It is expected to file a motion seeking authority for similar early-retirement deals with its other unions, including the IUE-CWA and the United Steelworkers.
Troy-based Delphi has said labor agreements negotiated by GM are among its biggest burdens. The company pays U.S. hourly workers around $75 an hour in wages and benefits.
Delphi said it will continue talks with GM and its unions on a new labor agreement that would help avert a strike at Delphi. Delphi has set a March 30 deadline to reach such an agreement with all its U.S. hourly workers.
"An accelerated attrition plan will help enable the transformation of our U.S. manufacturing and support operations into a much more competitive cost base," Delphi President and Chief Operating Officer Rodney O'Neal said in a statement.