GM To Offer Buyout To 46,000 Employees To Open Jobs For New Workers Who Will Receive Lower Wages, Reduced Benefits

Main Category: Health Insurance / Medical Insurance
Also Included In: Public Health
Article Date: 21 Jan 2008 - 6:00 PDT

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General Motors CEO Rick Wagoner on Thursday said that the company plans to offer a buyout package to about 46,000 employees, a move that he hopes will reduce the size of the company work force and open positions for new employees who will receive lower wages and reduced health and other benefits, the Detroit News reports (Terlep, Detroit News, 1/18).

Under a contract approved by GM and United Auto Workers last fall, the company will reduce labor costs through a two-tier wage and benefit system for noncore employees. Employees hired into the lower tier of the system will receive lower base pay and no defined-benefit pension plans or retiree health benefits. The contract also will establish a voluntary employees' beneficiary association managed by UAW that will reduce retiree health benefit liabilities for GM by about $47 billion (Kaiser Daily Health Policy Report, 10/16/07).

Wagoner said that GM and UAW have not completed discussions on the details of the buyout package, which the company plans to offer in February. GM employees who accept the buyout package would leave the company in April. GM has about 73,000 hourly employees, and analysts expect between 11,000 and 20,000 to accept the buyout package.

Reduced Costs
Wagoner said that the contract will reduce labor costs for GM by between $4 billion and $5 billion annually by 2010. According to the Detroit Free Press, although "much of the savings will come" from the VEBA, a "significant amount will come from reduced hourly labor costs," likely "sooner than many analysts expected." GM officials said that the VEBA will reduce costs for the company by $3 billion annually (Merx, Detroit Free Press, 1/18).

In addition, GM officials said that they expect pension and health care costs for U.S. hourly and salaried employees to decrease from $7 billion annually over the past 15 years to $1 billion annually after 2009 (Krisher, AP/San Jose Mercury News, 1/17).

Editorial
The plan by GM to offer a buyout package to "more than half its factory work force" will "force difficult decisions on many Michigan households and put a heavy onus on the UAW to get its new VEBA system up and running and well-funded enough to handle the health care needs of thousands more retirees," a Free Press editorial states. In addition, under the plan, "GM will be hiring a number of younger people who might not otherwise have had an opportunity to work for the auto company," the editorial states (Detroit Free Press, 1/18).

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