USA TODAY, March 28, 2006 (print ed., and on-line)Carmakers craft big, creative buyout offers to shed workersBy Sharon Silke Carty, USA TODAY
http://www.usatoday.com/money/autos/2006-03-28-buyout-packages_x.htmSALINE, Mich. --For seven years, Wachauna Johnson has been making lemonade out of the crummy job market she faced after graduating from college in 1999.
Failing to find work using her public relations degree, she landed a job on the line at a plant owned by auto supplier Visteon, pulling down a steady salary, overtime, gold-plated health care benefits and the promise of a pension.
Now, she's walking away with a buyout package that many would envy: up to four years of college tuition — which Johnson will use to get a graduate degree in nursing — plus half her salary and all her health care benefits while she's in school and possibly a couple hundred dollars a year for books.
"With this program being offered to us, I can finally move on," says Johnson, who never intended to work on the line until retirement.
The buyout was offered by Automotive Components Holdings, a shell company responsible for selling off plants that Ford Motor took over as part of a restructuring agreement with Visteon. Ford owned Visteon until spinning it off in 2000.
It takes a lot of cash to persuade an autoworker to leave his or her job. The jobs, hard to come by in an industry that's shrinking, might be monotonous and hard on the body, but the workers who have them know they've got something special: benefits and job security unparalleled in the rest of the country.
Detroit's automakers and many of their suppliers are willing to throw cash at workers in an attempt to right themselves financially. The companies, facing falling sales and high labor costs, must be creative and generous in trimming their workforces because by contract, their union workers are ensured almost complete job security.
Last week, General Motors said it will offer all its United Auto Workers-represented laborers the chance to get a check and run. The payout ranges from $35,000 to retire with full benefits to $140,000 to sever all ties with the automaker, giving up health care and pension. (Your Money: Consider all factors before deciding to accept buyout)
Although the offer is available to 113,000 GM workers, the company knows everyone won't jump at the deal. The automaker has said it wants to trim 30,000 jobs by 2008, so it is likely expecting only one in three workers to take a buyout.
In Detroit, where generations of families have made solid, middle-class livings working on the line, autoworkers worry about what they're giving up when they agree to walk away from jobs. They earn about $57,000 on average for jobs requiring little more than a high school education and a clean criminal record. They get health benefits unmatched by any other industry, paying next to nothing for medical bills. Unionized workers get paid even if they're not working.
Like many autoworkers, Johnson, 32, is a second-generation line worker; both her parents are blue-collar workers for GM. When she couldn't find a job using her education, she knew the auto plant would be a safe fallback. Many of her co-workers, also children of autoworkers, felt the same way. "People generally see what kind of life you have growing up," Johnson says. "Even if you do get a college degree, you get in at the plant because you know at least you can provide a good life for your family."
But it's not just job security that will keep many autoworkers clinging to their jobs.
Jay Waks, chair of law firm Kaye Scholer's employment and labor law practice, says years of tension between the union and the companies have bred a distrust that leaves many workers doubting how bad off the automakers really are.
"Take a reasonably intelligent worker who has been schooled in the idea that his employer is always out to take advantage of him, (and) he may not believe the company is really in jeopardy," Waks says. "He may think the company is trying to squeeze as much profit out of him as possible. ... There's a natural inclination not to take seriously a threat of financial need.
"When you add in all those factors ... you have a workforce that is reluctant to leave unless you dangle a lot of money in front of them to buy them out."
Pension worries remain
Beyond that, many workers eligible for early retirement have legitimate fears that even if they agree to leave the troubled companies, their sacrifice won't be enough for the companies to stave off bankruptcy, leaving a big, bleak question mark over the future of their pensions.
"I think we are deserving of every penny we can get out of them when it comes to our pension for what we had to endure for 30 years," says Doug Hanscom, a GM employee in Baltimore who has been drawing a paycheck since last May even though the company has no work for him.
As GM and Ford have lost market share in the USA to foreign competitors, they have found themselves in the middle of a massive consolidation. Last year, the auto industry announced it would eliminate 110,000 jobs, according to outplacement experts Challenger Gray & Christmas, and has shed 591,000 since 2000.
But to lose those workers and cut production capacity, the companies have been forced to sweeten the buyout pot, especially to get younger workers not eligible for early retirement to leave.
The innovative college tuition plan, unheard of by many industry watchers, is seen as a way to let workers control their destinies in an uncertain job market. But a promise of a college degree might not be enough to persuade them to take the plunge, especially in Michigan, where the unemployment rate was 6.2% in January, well above the national average of 4.7%.
"It's unclear if it's a route to a better job or to a more educated unemployment," says Harley Shaiken, a labor expert and professor at University of California, Berkeley.
Still, Shaiken says autoworkers should consider finding ways to retrain themselves with skills they can use in growing industries. "These are very grim times," he says. "We are in the midst of a major structural shift in manufacturing in general and the auto industry in particular. The number of good-paying, middle-class jobs that have been the bulk of manufacturing is likely going to be less in the future."
"The world is not the same as it used to be," says John Challenger, CEO of the outplacement firm. "Companies pay for skills in an era where brains are more important than brawn, and the forces of automation, globalization, deregulation and competition have changed what this kind of work is worth in the world."
Legacy felt
The domestic auto industry was growing and gaining strength in the years following World War II, when collectively bargained wages and benefits helped develop a burgeoning middle class. Now, the weight of those legacy costs for retirees is threatening the industry. Pension and health care costs are often cited as the largest drags on domestic auto companies' earnings.
The hefty buyout packages being offered in the auto industry are "the very last vestige of the social contract that was worked out with the very best companies in America and their workers," Challenger says. He says he hasn't heard of another company offering to pay college tuition as a buyout.
Severance packages in other industries pale in comparison with what the auto industry is offering workers to leave. Challenger says the average rank-and-file worker tends to get one week's pay for every year of service with a company, while middle managers and professional workers usually get one to two weeks. An autoworker with a $60,000 annual salary would be getting 81 weeks of severance if he or she took a $100,000 payout.
But the big buyouts can pay off for automakers. On average, active union members cost automakers $130,000 a year, whether they are working or not, according to the Center for Automotive Research. That cost drops to $50,000 a year when someone retires early or takes a buyout, and once that retiree is old enough to move onto Medicare and Social Security, the cost drops to $20,000 annually.
To persuade workers to take the educational buyout, Automotive Components Holdings held a college fair earlier this month to show them what kinds of schools they could attend if they take the offer.
The room was crowded with college and training school representatives, but few workers attended. At one plant where the package was offered earlier, only 12% of workers who took a buyout opted for the tuition plan.
Denise Hawkins, 50, who's been working on the line for 30 years, was collecting material from Eastern Michigan University. She might go back to school at some point, maybe when she retires, but not now. "I have a daughter in school, and I need to make sure I can help her out," Hawkins says.
Johnson, who is picking up some undergraduate classes at Wayne County Community College and will work toward her nursing degree at a local university, says there weren't many people attending the informational meeting explaining the tuition program, either. The mother of kids ages 5 and 2 says she chose her major because the need for nurses is growing.
Johnson says her husband is happy she's leaving the line. He has long wished she was doing a job that used her mind, she says.
"Some people are content to stay here the rest of their lives," Johnson says. "I'm not. I need more out of life."
