K
Kickin' Ass and Takin' Names
Guest
NEW YORK (CNNMoney.com) -- In an effort to shave ongoing losses,
General Motors offered lucrative buyouts Tuesday to 74,000 employees -
its entire U.S. hourly workforce.
The nation's largest automaker announced the latest round of buyouts
as it reported another loss on its core auto operations in the fourth
quarter, which combined with charges taken earlier in the year left GM
(GM, Fortune 500) with a company-record $38.7 billion net loss for
2007.
To try to stem automotive losses that have dogged the company since
2005, the company is making a range of offers, up to cash payments of
$140,000 to the remaining 74,000 GM workers represented by the United
Auto Workers union.
The goal is not to reduce headcount but rather to bring in new workers
at a lower cost.
About 46,000 of the GM employees are eligible to retire today and they
can take pension incentives worth between $45,000 to $62,500 to
retire.
In addition there are inducements for those who are within five years
of retirement to leave early and receive benefits.
Those who leave and agree to sever all ties with the company -
including giving up lucrative pension and health care coverage - will
receive a lump sum of $140,000 if they have 10 years of service. They
will receive $70,000 if they have less than 10 years of service.
"We've worked with our UAW partners to ensure our employees have a
variety of attractive options to consider," GM Chairman and CEO Rick
Wagoner said in a statement. "The special attrition program is an
important initiative that will help us transform the workforce."
The savings GM is likely to see with this offer are substantial. The
Center for Automotive Research estimates that by 2011 GM's hourly
workforce will be only 8% smaller than current levels - but more than
four out 10 of those workers will be new hires being paid a lower wage
rate.
The current veteran UAW member at GM today has an average base wage of
$28.12 an hour, but the cost of benefits, including pension and future
retiree health care costs, nearly triples the cost to GM to $78.21,
according to the Center for Automotive Research.
By comparison, new hires will be paid between $14 and $16.23 an hour.
And even as they start to accumulate raises tied to seniority, the far
less lucrative benefit package will limit GM's cost for those
employees to $25.65 an hour.
Lucrative buyout packages are not new at GM (GM, Fortune 500) and
rival U.S. automakers Ford Motor (F, Fortune 500) and Chrysler LLC. GM
offered similar deals to all its U.S. workers in 2006. That package
helped it pare U.S. hourly employment by nearly 40,000 in the past two
years.
Ford and Chrysler also have the provision in their new contracts to
pay new hires less in salary and benefits. But their workforces are
not nearly as old as the UAW membership at GM, so they may end up
seeing less turnover in their hourly staff.
Ford has its own buyout offer out to all its remaining 54,000 hourly
U.S. workers. The proposal was announced last month when the company
reported a fourth-quarter loss. Privately owned Chrysler has offered
buyout packages to hourly employees at targeted plants, but has not
make a companywide offer.
Fourth-quarter results
GM unveiled its latest cost-cutting moves as it reported a narrow
profit of $46 million, or 8 cents a share, excluding special items, in
the fourth quarter.
The adjusted earnings were far better than the loss of 54 cents a
share that analysts surveyed by earnings tracker Thomson First Call
had forecast, but worse than the year-ago result of a $180 million
profit, or 32 cents a share.
But the profit in the most recent quarter was due primarily to a $1.6
billion tax benefit. GM would have otherwise lost about $2.75 a share
in the period excluding items, although First Call and analysts are
not likely to exclude that gain when comparing results to forecasts.
Including special items, the company reported a quarterly net loss of
$722 million, or $1.28 a share. That compares to net income of $950
million, or $1.68 a share, it posted in the year-ago period.
Concerns by traders that the company's actual performance was worse
than it seemed at first blush sent shares down 1.7% in pre-market
trading. But shares swung to a gain of 1.5% in late-morning trading
after the company's call discussing its results and outlook in more
detail.
The company saw strong vehicle sales, as automotive revenue hit a
record $46.7 billion, easily topping forecasts of $44.4 billion. But
the company's automotive profit-loss performance took a step backwards
most of its regions around the globe.
The company posted a $803 million fourth quarter pretax loss in its
auto unit, compared to a narrow $8 million profit on that basis a year
earlier. The worsening performance was due to its core North American
operations, where industrywide sales were weak in the period. North
American plants lost $1.06 billion in the period on that basis,
compared to only a $129 million loss a year earlier.
The company also saw pretax losses grow in its European operations and
profits decline in the Asia-Pacific region that has become
increasingly important for the company's fortunes. But improved pretax
profits in GM's Latin America-Africa-Middle East region more than
balanced out the worsening performance in the other overseas regions.
General Motors offered lucrative buyouts Tuesday to 74,000 employees -
its entire U.S. hourly workforce.
The nation's largest automaker announced the latest round of buyouts
as it reported another loss on its core auto operations in the fourth
quarter, which combined with charges taken earlier in the year left GM
(GM, Fortune 500) with a company-record $38.7 billion net loss for
2007.
To try to stem automotive losses that have dogged the company since
2005, the company is making a range of offers, up to cash payments of
$140,000 to the remaining 74,000 GM workers represented by the United
Auto Workers union.
The goal is not to reduce headcount but rather to bring in new workers
at a lower cost.
About 46,000 of the GM employees are eligible to retire today and they
can take pension incentives worth between $45,000 to $62,500 to
retire.
In addition there are inducements for those who are within five years
of retirement to leave early and receive benefits.
Those who leave and agree to sever all ties with the company -
including giving up lucrative pension and health care coverage - will
receive a lump sum of $140,000 if they have 10 years of service. They
will receive $70,000 if they have less than 10 years of service.
"We've worked with our UAW partners to ensure our employees have a
variety of attractive options to consider," GM Chairman and CEO Rick
Wagoner said in a statement. "The special attrition program is an
important initiative that will help us transform the workforce."
The savings GM is likely to see with this offer are substantial. The
Center for Automotive Research estimates that by 2011 GM's hourly
workforce will be only 8% smaller than current levels - but more than
four out 10 of those workers will be new hires being paid a lower wage
rate.
The current veteran UAW member at GM today has an average base wage of
$28.12 an hour, but the cost of benefits, including pension and future
retiree health care costs, nearly triples the cost to GM to $78.21,
according to the Center for Automotive Research.
By comparison, new hires will be paid between $14 and $16.23 an hour.
And even as they start to accumulate raises tied to seniority, the far
less lucrative benefit package will limit GM's cost for those
employees to $25.65 an hour.
Lucrative buyout packages are not new at GM (GM, Fortune 500) and
rival U.S. automakers Ford Motor (F, Fortune 500) and Chrysler LLC. GM
offered similar deals to all its U.S. workers in 2006. That package
helped it pare U.S. hourly employment by nearly 40,000 in the past two
years.
Ford and Chrysler also have the provision in their new contracts to
pay new hires less in salary and benefits. But their workforces are
not nearly as old as the UAW membership at GM, so they may end up
seeing less turnover in their hourly staff.
Ford has its own buyout offer out to all its remaining 54,000 hourly
U.S. workers. The proposal was announced last month when the company
reported a fourth-quarter loss. Privately owned Chrysler has offered
buyout packages to hourly employees at targeted plants, but has not
make a companywide offer.
Fourth-quarter results
GM unveiled its latest cost-cutting moves as it reported a narrow
profit of $46 million, or 8 cents a share, excluding special items, in
the fourth quarter.
The adjusted earnings were far better than the loss of 54 cents a
share that analysts surveyed by earnings tracker Thomson First Call
had forecast, but worse than the year-ago result of a $180 million
profit, or 32 cents a share.
But the profit in the most recent quarter was due primarily to a $1.6
billion tax benefit. GM would have otherwise lost about $2.75 a share
in the period excluding items, although First Call and analysts are
not likely to exclude that gain when comparing results to forecasts.
Including special items, the company reported a quarterly net loss of
$722 million, or $1.28 a share. That compares to net income of $950
million, or $1.68 a share, it posted in the year-ago period.
Concerns by traders that the company's actual performance was worse
than it seemed at first blush sent shares down 1.7% in pre-market
trading. But shares swung to a gain of 1.5% in late-morning trading
after the company's call discussing its results and outlook in more
detail.
The company saw strong vehicle sales, as automotive revenue hit a
record $46.7 billion, easily topping forecasts of $44.4 billion. But
the company's automotive profit-loss performance took a step backwards
most of its regions around the globe.
The company posted a $803 million fourth quarter pretax loss in its
auto unit, compared to a narrow $8 million profit on that basis a year
earlier. The worsening performance was due to its core North American
operations, where industrywide sales were weak in the period. North
American plants lost $1.06 billion in the period on that basis,
compared to only a $129 million loss a year earlier.
The company also saw pretax losses grow in its European operations and
profits decline in the Asia-Pacific region that has become
increasingly important for the company's fortunes. But improved pretax
profits in GM's Latin America-Africa-Middle East region more than
balanced out the worsening performance in the other overseas regions.
