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26 percent of U.S. force accepts latest offer
By Alex Ortolani
and Jeff Green
Bloomberg News
Published on Friday, May 30, 2008
General Motors Corp., struggling to cut costs and end losses, said about 26 percent of its U.S. factory workers accepted the latest offer to leave the biggest U.S. automaker and help clear out its highest-paid workers.
About 19,000 of GM's United Auto Workers members signed up for the buyout packages, and most will leave by July 1, GM said Thursday.
The latest departures will add to the 34,400 UAW employees who took buyouts or early retirements two years ago.
The buyouts are part of Chief Executive Officer Rick Wagoner's plan to add to the $9 billion in annualized savings achieved since 2005 as rising gasoline prices and a weakening U.S. economy extend losses. Detroit-based GM hasn't had an annual profit in three years or a U.S. sales gain in eight.
''We view this as a positive for the stock,'' said analyst Himanshu Patel, who said the buyout numbers were more than twice what he expected. Patel, of JPMorgan & Chase Co. in New York, said in an investor note that GM could save as much as $2.1 billion per year
because 15,000 workers won't have to be replaced as production slows.
The departures will allow GM to install new employees who will be paid about $14 an hour, about half the wage of the current unionized work force, while reducing health-care and retirement benefits.
In the past two years, about 33,600 U.S. factory workers departed Ford Motor Co. through buyouts. Last month, Dearborn, Mich.-based Ford said an additional 4,200 had accepted its latest offers.
GM gained 23 cents to $17.38 in Thursday trading for its first advance since May 19.
Wagoner will also announce a strategy to speed a shift from trucks to cars next week at the annual shareholders meeting in Wilmington, Del., people familiar with that plan said.
GM's U.S. truck sales fell 18 percent in the first four months of this year as buyers cope with record gasoline prices by seeking models that burn less fuel. GM's total sales fell 12 percent. The company has lost $54 billion since the end of 2004.
GM offered retirement and buyout incentives to all 74,000 of its UAW members in February. Assembly line workers with 30 or more years of service were eligible to receive payments of $45,000. Employees with a skilled-trade designation such as electricians were to get $62,500. The new payouts exceed the $35,000 offered previously to retirement-eligible UAW members.
About 21,500 UAW members at GM were eligible for full retirement and another 25,000 were eligible for other retirement options, GM said in January.
Retirees can take payouts in lump sums, as an annuity or as a contribution to a 401(k) or individual-retirement account, GM said. They can also combine a cash payment with the fund option.
The automaker will tap its pension-fund surplus to finance the buyouts for employees with at least 30 years' service. The U.S. pension was overfunded by $20 billion, including about $11.5 billion to $12 billion for hourly workers, at the end of 2007.
General Motors Corp., struggling to cut costs and end losses, said about 26 percent of its U.S. factory workers accepted the latest offer to leave the biggest U.S. automaker and help clear out its highest-paid workers.
Get the full article here.
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