Days After Worker Buyouts, GM to Cut Hundreds of Salaried Jobs

[Marc]

From Bloomberg news:

GM to Fire Salaried Staff Through April, People Say

March 24 (Bloomberg) -- General Motors Corp., reeling from $10.6 billion in losses last year, will fire hundreds of its U.S. salaried employees starting next week, according to people familiar with the plan.

The firings, which begin March 28 at several locations on what employees are calling "Black Tuesday,'' will be followed by another round in April, according to people at GM, who declined to be identified because the plan hasn't been made public. GM spokesman Steve Harris had no comment.

The workers will get GM's salaried severance package with no additional payments, the people said, unlike the buyouts of up to $140,000 and retirement incentives offered this week to 113,000 hourly workers in the U.S. Chief Executive Officer Rick Wagoner plans to reduce losses by slashing costs and jobs and selling assets while bolstering revenue by redesigning vehicles.

"They're liquidating, they're firing, they're retiring,'' said Sean McAlinden, a labor analyst at the Center for Automotive Research in Ann Arbor, Michigan. "This is a GM that's getting in shape much faster than it's ever before in any past restructuring.''

Wagoner said in November that the Detroit-based automaker planned to reduce its salaried and contract workforce this year by about 7 percent. He didn't say how many workers would be affected. GM has 36,000 salaried U.S. workers and doesn't disclose how many contract employees it has, spokesman Robert Herta said.

GM stock was trading at $22.20 at 1:32 p.m. in Frankfurt, up from $22 yesterday in New York Stock Exchange composite trading. The U.S. shares have gained 13 percent this year.

`Getting Close'

"We're getting close to benchmark, if not at benchmark performance in salaried and contract executive levels versus our competitors,'' Wagoner said in a Nov. 21 press conference. "By the same token we think we see areas to improve, so we will be pursuing those in '06.''

GM in January already fired several hundred U.S. contract workers, according to a person familiar with that action. Contract workers are employed by an outside company to perform work for GM. In the first quarter of 2005, GM paid about $148 million for the voluntary buyouts of 2,800 salaried employees, or 5 percent of the salaried workforce.

GM introduced a new severance package this year for employees who are fired, according to a document from GM's compensation policies obtained by Bloomberg and confirmed by people familiar with the program. The modifications were to "ensure competitiveness in the marketplace.''

Employees with the company at least a year who are fired will be paid one month of their base salary per full year of employment, up to 15 months, according to the policy. Those workers also maintain their health-care insurance for that period and receive three months of outplacement assistance.

Job Cuts

GM's salaried and contract workforce had been cut 32 percent from 2000 to the end of last year, Wagoner said in November. When Wagoner took over as CEO in 2000, GM had 44,000 U.S. salaried workers, 18 percent more than it does now.

"I don't remember GM ever doing anything like this before, not firing people and putting them out on the street with a box,'' said McAlinden, who has studied GM's past restructuring plans. "They were called `Mother GM' for a reason.''

The firings are the latest in several actions aimed at GM's salaried workforce. On March 7, that automaker said it will freeze defined-benefit pension plans for its 36,000 salaried workers and switch to a defined-contribution plan. That change will save GM, the world's largest automaker, about $420 million on a pretax basis in 2007 and reduce the Detroit-based company's year-end 2006 pension liability by about $1.6 billion.

Defined Benefits

Defined-benefit plans guarantee a set monthly stipend upon retirement. These plans differ from defined-contribution plans, such as a 401(k), which are funded by employer and employee contributions and grow until the account holder retires and begins withdrawals.

Wagoner also said Feb. 7 that he will slash his own compensation in half and trim pay by 30 percent for his three top lieutenants. GM earlier won $1 billion in annual health-care cuts from union employees, part of a plan to restore profit by trimming $7 billion in yearly costs.

GM in February said it will cut pretax health-care expenses by about $900 million a year by capping salaried health-care coverage at 2006 levels for eligible GM salaried workers. GM salaried employees hired after Jan. 1, 1993, don't get retiree health care. GM also halved its $2-a-share annual dividend.

Retirement Incentives

GM is also offering payments of $35,000 to get union workers with 30 years or more service to retire on a $36,000 pension. The $140,000 buyouts are for union employees not eligible for retirement and with at least 10 years at the company.

Cutting the dividend and salaried costs and compensation were moves suggested Jan. 10 by Jerome York, who was appointed to the GM board in February. York, an aide to billionaire investor Kirk Kerkorian, has said cuts in the salaried workforce were needed to carve deeper concessions from union workers.

Kerkorian, GM's fourth-largest investor, holds a 9.9 percent stake in the automaker through his holding company, Tracinda Corp. York said Jan. 10 that Kerkorian may buy an additional 12 million GM shares if the automaker follows his recommendations.

[Wes Bucey]

From the Chicago Tribune March 25, 2006:

"General Motors' engineering staff has been told all leaves have been canceled.

They have been ordered to report for work Tuesday morning--with company cars and keys.

GM Friday wouldn't comment on Tuesday's meeting, but insiders said only the engineering staff is affected--for now. Cuts in other departments, including sales and marketing, would come later, perhaps as early as next month."

That should make for some tense weekends in a lot of households!

[AndyN]

bring all your company stuff in, cancel all leave, travel and all the conference rooms have been booked by HR...........

Andy

[Wes Bucey]

What was the REAL deal when GM created Delphi? This move by Delphi creditors may give some interesting answers.

Delphi creditors committee demands GM documents
Saturday March 25, 4:39 AM EST
By David Bailey

CHICAGO (Reuters) - A committee for unsecured creditors in Delphi Corp.'s (DPHIQ) bankruptcy on Friday demanded General Motors Corp. (GM) documents detailing ties to its former parts unit dating back to 1997.

GM is seeking unsecured creditor status in a bid to offset up to $12 billion of costs from wage and benefit agreements it made for the Delphi spin off. The creditors plan to challenge GM's claim, which could reduce recoveries they might receive from the reorganization.

The documents request ranged from labor and health care agreements, through financial and board records of GM's 1999 spinoff of Delphi, to guarantees the automaker gave Delphi.

"Even a cursory examination of the record in these cases demonstrates how intertwined GM and the debtor are, and how the claims that each may have against the other are integral to the outcome of these cases," the committee said in court papers.

The documents would help the committee understand the claims GM has or may assert against Delphi under the terms of the spinoff and claims Delphi has against GM, issues that must be addressed quickly because of ongoing labor talks, it said.

The committee asked a New York bankruptcy judge to rule on its request April 7, the same day Delphi wants the court to approve sweeping early retirement incentives for hourly workers it reached in a deal with GM and the United Auto Workers.

The retirement incentives cover up to 17,000 of Delphi's more than 34,000 U.S. hourly workers, while 5,000 other workers would have the right to return to GM. Talks on possibly far more contentious wage and benefit cuts are ongoing.

Delphi has said it must have at least the framework of a comprehensive deal on wages, benefits and job cuts by March 30 or it will start the court process of voiding labor contracts and changing retiree benefits the following day.

The documents requested could help determine if GM is an unsecured creditor, and affect the amount and priority of GM's claims, the committee said. Delphi cited high wage and benefit costs inherited from GM as a main reason for its bankruptcy.

GM most recently said it believes its exposure to Delphi's bankruptcy to range from $5.5 billion to $12 billion, with a figure toward the lower end more likely based on agreements to cover worker benefits should Delphi fail.

"It's not surprising the creditors committee would seek to nullify some of the claims GM has, given the potential size of our claims," GM spokesman Jerry Dubrowski said.

On Friday, the committee said it could not wait for GM to file a claim before seeking documents needed to respond, citing a likely rapid pace of negotiations on wage and benefit cuts.

A challenge to GM's claims, if successful, could increase the return for other unsecured creditors and the remote possibility of a stock holder recovery in the reorganization of Delphi, which filed for Chapter 11 protection last October.

Bankruptcy Judge Robert Drain has approved formation of a committee to represent shareholder interests. However, he expressed doubts for a material shareholder recovery.

The creditors committee hinted at a potential challenge to GM's claims weeks ago when it opposed a GM request to be added as a member to the unsecured creditors committee and said the committee was examining the circumstances of the spinoff and the array of agreements Delphi made that benefited GM.

At the time, the committee said GM, Delphi and the unions had a powerful incentive to solve labor cost issues, but no incentive to limit eventual GM claims against the estate.

[Jim Wynne]

Originally Posted by AndyN

bring all your company stuff in, cancel all leave, travel and all the conference rooms have been booked by HR...........

Andy

A little but...
I recall reading a while back about a company that told a bunch of people on Friday that an important meeting had been scheduled at a hotel conference room, and those people were to report there on Monday morning rather than going directly to work. When they arrived they found they had been canned and all of their personal belongings were packed up in cardboard boxes and waiting for them. Undoubtedly one of those companies that liked to say, "Our employees are our most valuable assets."