GM Begins Firing Salaried Workers at About 30 U.S. Locations

[Marc]

From Bloomberg:

GM Begins Firing Salaried Workers at About 30 U.S. Locations

March 28 (Bloomberg) -- General Motors Corp., struggling with $10.6 billion in losses last year, started firing hundreds of its U.S. salaried employees at about 30 U.S. locations, part of a North American restructuring plan.

Today's firings are the first of cuts that will continue throughout the year and are part of GM's plan to reduce its U.S. salaried and contract workforce by about 7 percent this year, GM spokesman Robert Herta said. The firings will include employees in most areas of the company and the workers will get severance payments and outplacement assistance, he said.

"Right now this company is a size 38 in a size 46 suit, they have to downsize,'' said John Casesa, an industry consultant at New York-based Casesa Strategic Advisors LLC.

The firing of salaried employees is just one example of the so-called "equality of sacrifice'' urged by GM board member Jerome York, who has said cuts in pay and benefits for salaried workers will help persuade union employees to agree to concessions. Chief Executive Rick Wagoner in February cut his own pay in half and announced cuts to salaried workers health care and pension.

GM last week offered buyouts of up to $140,000 to 113,000 hourly workers in the U.S. as part of a plan to eliminate 30,000 union jobs and close 12 North American locations by 2008.

A few hundred workers will be fired today, Herta said. Those employees with company cars will be given time to find a new vehicle and workers will be treated with "dignity'' he said, denying reports in Detroit newspapers that they would be sent home in fleets of taxis.

GM is not saying how many workers will be fired this year, Herta said. GM has 36,000 salaried U.S. workers and doesn't disclose how many contract employees it has, he said.

Investor Optimism

GM shares rose 28 cents to $22.93 yesterday in New York Stock Exchange composite trading. They've gained 18 percent this year on optimism job cuts and increased sales of new products will reduce losses.

GM in January fired 500 U.S. contract workers, Herta said. Contract workers are employed by an outside company to perform work for GM. GM's normal attrition rate for salaried workers, including buyout offers, is about 5.5 percent, Herta said.

"It's clear that the more they ask from the union, the more they're going to have to take from the salaried workers,'' Casesa said. "This is the beginning of the process, not the end.''

Employees who are fired will be paid one month of their base salary per full year of employment, up to 15 months, according to a copy of GM severance policy obtained by Bloomberg. Those workers also maintain their health-care insurance for that period and receive three months of outplacement assistance.

Earlier 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.

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.

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.

GM in February said it will cut pretax health-care expenses by capping salaried health-care coverage at 2006 levels for eligible GM salaried workers.

Cutting salaried costs and compensation were moves suggested Jan. 10 by 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.