Buffalo News (New York), February 13, 2008, Wednesday

Copyright 2008 Buffalo News

Buffalo News (New York)

Distributed by McClatchy-Tribune Business News

February 13, 2008, Wednesday

SECTION: STATE AND REGIONAL NEWS

HEADLINE: GM asks workers to take buyout

BYLINE: Matt Glynn, The Buffalo News, N.Y.

BODY:

Feb. 13--For hourly workers at General Motors' engine plant in the Town of Tonawanda, it's decision time again: accept GM's incentive to leave, or stay.

GM on Tuesday announced a buyout offer for all 74,000 of its workers who are represented by the United Auto Workers, including more than 1,500 at the River Road engine plant. The offer came on the same day GM reported the largest-ever full-year loss for an auto company, $38.7 billion.

Although the automaker attributed much of the loss to an accounting change, the earnings numbers show that North American sales are lagging and the slowing economy leaves little optimism for a quick turnaround.

GM is striving to cut costs by encouraging older workers to leave and create openings for entry-level workers who would earn about half the $28-an-hour rate.

GM made similar buyout offers to its workers in 2006, and 656 workers at the Tonawanda plant took them. Other auto-industry plants in the region have gone through similar processes in recent years, reducing their populations and payrolls.

The GM plan includes incentives for those eligible to retire of $45,000 for production employees and $62,500 for skilled trades workers. Among the other options are a $140,000 cash buyout for employees with 10 or more years of credited service or seniority, in exchange for quitting and cutting ties to GM. For workers with less than 10 years, the offer is $70,000, with the same requirements attached.

Patrick Heraty, professor of business administration at Hilbert College, said GM's main objective with its 2006 buyout plan was to reduce head count. "The goal here is not so much to reduce head count but to replace experienced workers with people who make half [as much money]," he said.

GM and the UAW last year agreed to a "two-tier" wage system under which a new class of workers starts out making half as much. The wages of existing workers were not affected.

The lower tier pay applies only to those jobs defined as "noncore," meaning not directly related to assembly. GM and UAW representatives are starting to visit plants to define which jobs are "noncore," said Dan Flores, a GM spokesman.

The question that can't be answered yet is how many of the Tonawanda plant's hourly workers will take one of GM's offers. The plant has 1,522 hourly workers, including 170 on layoff. The average employee there has 25 years of service and is nearly 52 years old, according to the company.

Flores said GM does not have a target number of workers for its buyout plan.

Flores said workers will have 45 days from the time they are formally briefed on the offer to decide whether to take it. If they sign up, they will have a seven-day grace period to reverse the decision, he said.

GM's goal is to have everyone who signs up leave the company by no later than July 1.

Bob Tresp, 53, who started at GM in 1976, said he would take the buyout. Like other workers, he was awaiting more specifics but said the timing suited him. "I could do a dance across my yard right now," he said of his reaction to the offer.

Tresp said in his post-GM life, he has thought about taking some classes, coaching football and perhaps putting his home-improvement skills to work by going into business for himself.

Roman Minkewicz, who has worked at the plant for 23 years, said he was not going to take the offer, but he expects it will be a nudge for people who were thinking about leaving anyway.

"Many of the people who were contemplating retiring feel that will be a good deal for them, because they were ready to walk out the door," Minkewicz said. Others, he said, will wonder whether their benefits will be protected down the road and are nervous about walking away.

"Most are thinking about sticking it out a couple of years to be financially secure," he said.

Art Wheaton, director of labor studies at Cornell University's School of Industrial and Labor Relations in Buffalo, said GM won't be able to realize bigger savings on its labor costs until it can coax more higher-paid workers into leaving.

"The two-tier wage system does not help them if they don't hire new people," he said.

Even though newly hired workers won't make as much as their predecessors, Wheaton said a $14-per-hour job with benefits in this region is still good compared with pay in some other industries. And the plant should benefit from an influx of new people and new ideas when that time comes, he said.

Heraty said the region is struggling to save its manufacturing jobs.

"It's difficult on the families, and it's difficult on the local economy," he said. But the choice nowadays, he said, isn't whether the region prefers higher-paying to lower-paying jobs, but how many auto industry jobs can be preserved.

Howard Foster, professor emeritus of industrial relations at the University at Buffalo's School of Management, said GM's long-term vision is to operate its plants with a less-costly work force.

"It will take a while, and this will accelerate it," he said.

GM on Tuesday said its all-time high loss of $38.7 billion in 2007 was due largely to a third-quarter charge related to unused tax credits. Excluding that tax charge and other special items, GM lost $23 million, or 40 cents per share, in 2007 compared with a net income of $2.2 billion in 2006.

GM reported $181 billion in revenues for the year, down from $206 billion in 2006. The company sold 9,369,524 vehicles worldwide, up 3 percent from the year before.

For the fourth quarter, GM posted a loss of $722 million, or $1.28 per share, compared with a net income of $950 million in the year-ago quarter. Fourth-quarter charges included $622 million to Delphi for its restructuring efforts and a gain of $1.6 billion because of tax credits related to GM's pension liabilities and the sale of its Allison Transmission unit.

GM's North American division continued to struggle, but the automaker was profitable in every region outside North America.

While 2008 is expected to be another difficult year for GM and the U.S. auto industry, GM officials say the automaker's restructuring plans are long-term, aimed at earnings increases by 2010 and 2011 as changes involving its labor costs and retiree health care costs bear fruit.

The Associated Press and Bloomberg News contributed to this report.

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LOAD-DATE: February 13, 2008