03 Feb 2009
Feb. 3 (Bloomberg) -- General Motors Corp. and Chrysler LLC, propped up by $17.4 billion in U.S. loans, are speeding up efforts under a Feb. 17 deadline to shed traditional labor practices and justify keeping the money.Buyouts are being offered to almost all their 91,600 United Auto Workers members to make room for new employees earning half of the $28 hourly wage of their predecessors. The UAW's "jobs bank," in which workers were paid when they didn't have duties, ended at GM yesterday, a week after being halted at Chrysler.
"With everything that has happened over the past 24 hours it's almost desperation pace," Dennis Virag, president of Automotive Consulting Group in Ann Arbor, Michigan, said yesterday. "When you offer all of your hourly workers a buyout, that's certainly a sign of a troubled organization."
Bringing in lower-cost employees and unwinding programs such as the jobs bank moved Detroit-based GM and Chrysler closer to two hurdles they must clear to retain the federal aid. This month's progress report sets the stage for a final deadline on March 31 to convince the Treasury the automakers can be viable.
"There are two forces that are propelling this," said Harley Shaiken, labor relations professor at the University of California at Berkeley. "One is their desire to further reduce the workforce because of the collapse in sales. And second, they want to comply with that Feb. 17 deadline."
Cutting Debt, Brands
While working on labor costs, GM also is in talks to pare $27.5 billion in unsecured debt to about $9.2 billion in a swap for equity, and it plans to shut dealers and reduce obligations to a union retiree health fund by 50 percent to $10.2 billion in a separate equity swap.
A UAW official also said yesterday that the biggest U.S. automaker is in talks to sell a medium-duty truck unit to Japan's Isuzu Motors Ltd. as it tries to unload assets including the AC Delco parts group and the Hummer and Saab brands.
The Treasury Department set the loan terms under then- President George W. Bush in December, bailing out GM and No. 3 Chrysler after the companies said they would run out of operating funds as early as last month. The automakers say they oppose the idea of filing for bankruptcy.
UAW President Ron Gettelfinger has said the union will do its part to help find savings as long as other stakeholders accept concessions. The UAW agreed in 2007 to pay new employees half the wages of current workers -- a split the union resisted for most of the past seven decades -- and transfer liability for retiree health care to a union-run fund.
$1 a Year
GM Chief Executive Officer Rick Wagoner said he will work for $1 a year, and other executives agreed to pay cuts as the automaker also slashed benefits and eliminated jobs for salaried workers.
"One of the things the automakers are trying to do is to send a message to all involved that everyone needs to participate in this," Virag said. "Bondholders are trying to dig in their feet and say we can't give any concessions. The message being portrayed is that everyone is going to have to make some concessions and share in the pain."
GM fell 12 cents, or 4 percent, to $2.89 yesterday in New York Stock Exchange composite trading, the lowest since Nov. 20. GM's 8.375 percent note due in July 2033 gained 0.25 cent to 15 cents on the dollar, yielding 55.7 percent, according to Trace, the bond-pricing service of the Financial Industry Regulatory Authority.
GM spokesman Tony Sapienza had no comment on the new buyouts, and a Chrysler spokeswoman, Shawn Morgan, declined to go beyond a company statement confirming that all 26,800 of its U.S. hourly workers were eligible. UAW spokesman Roger Kerson didn't return a phone call.
Buyout Offers
The GM program covers about 64,000 workers willing to retire or quit and consists of a $25,000 voucher to buy a new auto and $20,000 in cash, said a UAW official, who didn't want to be identified because the details are private.
Chrysler is offering a $50,000 cash payment and a voucher for $25,000 to purchase a new vehicle for workers who are eligible to retire, said another UAW leader, who also didn't want to be named because the specifics haven't been announced. Workers not eligible for retirement are being offered $75,000 in cash plus a $25,000 voucher, the union leader said.
CEO Robert Nardelli told employees last week that Auburn Hills, Michigan-based Chrysler wants to trim prices it pays for parts and reduce dealers' margins on vehicle orders. Cerberus Capital Management LP's Chrysler will try to cut debt "to levels that can be adequately supported by the company's ongoing cash flow capabilities," he said in an e-mail.
Ford Motor Co., which hasn't sought emergency U.S. loans, doesn't have a plan to offer additional buyouts at this time, spokeswoman Marcey Evans said yesterday. Ford said last week that its UAW jobs bank program is ending and announced a $14.6 billion annual loss, the biggest in its 105-year history.
The jobs bank program started in 1984 as part of an agreement to help prevent firings of workers replaced by robots or other productivity improvements.
"Abolishing the job bank doesn't do much," Virag said. "It's more of a sign, the significance of it rather than the actual losing of it."
