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GM Eliminates Jobs--the effect of outsourcing
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Gates Foundation
GM Eliminates Jobs--the effect of outsourcing


Reuters, 6/26/6, By Poornima Gupta and Kevin Krolicki

DETROIT (Reuters) - General Motors Corp. (NYSE:GM - news) said on Monday that 35,000 workers -- or almost a third of its hourly work force -- had accepted payouts to retire and leave the company, topping expectations and putting the world's largest automaker two years ahead of schedule on planned job cuts.  Also, Delphi Corp. (Other OTC:DPHIQ - news), a former GM parts unit that is restructuring in bankruptcy, said 12,600 of its hourly employees had agreed to retire under an incentive plan offered as part of an agreement with GM and United Auto Workers union


The better-than-expected acceptance of the offers makes it more likely that GM can avoid a costly work stoppage at Delphi and allows the automaker to slash the rolls of unionized workers being paid long after their jobs are eliminated, GM said.  GM also raised its cost savings target for structural costs -- representing mostly its recurring payroll-related burden -- to at least $8 billion annually by the end of 2006 from $7 billion.

GM shares, which have rallied more than 40 percent this year on expectations the battered automaker was making progress in its restructuring, gained 1 percent in after-hours trade.  Shares of GM rose 1 percent to $28.05 on the Inet electronic brokerage system from a close of $27.75 at the New York Stock Exchange.

"This is another step in the turnaround accomplished," said David Healy, an analyst with Burnham Securities, who personally owns GMAC notes.  Other analysts were equally positive, noting that GM would be able to realize immediate cost savings on wages as it brings in lower-paid temporary workers to staff depleted factories.  "This is great news. It's higher than everybody anticipated. That's a good thing. But there is still a long way to go," said Rebecca Lindland, an analyst at Global Insight.

The voluntary job cuts, one of the largest such programs ever undertaken by a U.S. corporation, are part of a sweeping restructuring after a $10.5 billion loss at GM last year.  About 4,600 GM employees accepted buyouts and about 30,400 chose early retirement, GM said, and Chief Executive Rick Wagoner said the total was higher than management had expected. "I think it's fair to say we are very rapidly on the road back," he told reporters at a news conference.


GM had offered buyouts ranging from $70,000 to $140,000 to about 113,000 of its factory workers in a bid to reduce costly benefits for its rapidly aging work force.  The number of workers who accepted the early retirement incentives has been closely watched as an indicator of the success of GM's turnaround.

Coupled with the loss of 6,500 jobs in 2005 mostly through retirement, GM said it expected to reach its target of cutting 30,000 jobs by January 2007, two years ahead of schedule. GM said it expected to capture about $5 billion in savings in 2006.  Wagoner said he also expected a sharp reduction in the number of GM employees in the so-called jobs bank, a much-criticized program negotiated with the UAW that continues to pay laid-off workers nearly full salary and benefits.

GM expects to take a net after-tax charge of about $3.8 billion for the buyout and early retirement program. Most of the charge will be included in second-quarter results, GM said.


Delphi, spun off from GM in 1999, filed for Chapter 11 protection in October, hurt by high wage and benefits costs.   The company has said it wants to eliminate four-fifths of its 33,100 person hourly work force by 2010 and cut wages from about $27 an hour to as little as $12.50 {and hourly employees do not get job benefits—jk}.

The prospect of a strike at Delphi had been a major concern for analysts weighing GM's immediate prospects, since the automaker still ranks as Delphi's largest customer and could face a costly production shutdown as a result.  But Wagoner said the success of GM's buyout had defused Delphi tensions. Some workers at the auto parts maker will return to GM. Others are still weighing separate buyout offers.  "It goes a long way to address a future of Delphi that works for everyone," Wagoner said.

GM, which has seen U.S. auto sales slip 8 percent so far this year, now must protect its market share of just above 23 percent in order to avoid further cuts in capacity.   Wagoner said GM was sticking with a plan announced in November that would shut 12 plants. {What is missing is that the shutdowns amount to more than an adjustment of 8% lower sales, the difference is made up by the importation of parts made overseas—jk}

The company's Oklahoma City assembly plant, already idled, had the highest acceptance of early retirements at more than 1,500 or two-thirds of the facility's hourly payroll, GM said.


There is a steady erosion of jobs and pay.  This is because of the globalization of manufacturing and built upon the abandonment of protective tariffs. The wisdom of our forefathers has been lost as we march towards lower standard of living and increasing dependence upon foreign resources and manufacturing. The solid economic foundation built up since the great depression has been lost.  In spite of 70 years of increasing productivity, since the 1960s workers have not received a share of this—jk. 


This of course can be reversed if we take big business out of government and have those who direct our economy represent all the people--jk. 

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