Tonawanda News, February 12, 2008, Tuesday

Tonawanda News

Tonawanda News

Published: February 12, 2008, Tuesday

GM offering big buyouts
By Daniel Pye/pyed@gnnewspaper.com

After posting a $38.7 billion loss in 2007, General Motors has reached an agreement with the United Auto Workers union to offer buyout incentives to all of its 74,000 UAW-represented employees.

The four-part attrition plan gives exit options to every employee regardless of his or her time with the company, but not every employee is eligible for all of the options, said Dan Flores, GM corporate manufacturing and labor spokesman.

Employees are eligible for retirement after 30 years, but some choose to stay. GM is offering skilled trades employees with more than 30 years $62,500 and production employees $45,000 to take their retirement.

The retirement incentive can be taken in a lump sum, rolled over into a 401K or IRA, paid in a monthly annuity in addition to regular pension checks, or in a combination of partial lump sum and partial 401K or IRA payment. That flexibility is something the company is proud of, Flores said.

“This is something not offered to Ford or Chrysler employees,” Flores said. “Ours have tax deferred options, so that the $62,500 can be put into a 401K. That way they won’t pay taxes until the money is withdrawn.”

For the Tonawanda Powertrain plant in particular, this category constitutes the majority of UAW members, said Arthur Wheaton, workplace and industry education specialist at Cornell University.

“Close to 50 or 60 percent are in that group and will probably take the buyout to walk away,” Wheaton said.

Employees with between 26 and 29 years of service will be eligible for a pre-retirement program that allows them to go on leave while still reaching full retirement benefits.

“These employees can volunteer to go on pre-retirement leave,” Flores said. “They’ll receive fixed monthly payments in an amount that’s less than a typical pension, but they’re technically not retired. They will continue to accrue seniority until they hit 30 years, when they’ll automatically be retired.”

This route carries no cash incentive, but effectively allows employees to retire early. For employees over 50 with 10 or more years of service, the company is offering a reduced pension payment and full benefits to those willing to take early retirement.

In addition, all employees are being offered the option of a cash buyout to sever all ties with the company. Under that deal, employees with more than 10 years will get $140,000 those with less will receive $70,000. That leaves the person without health care or benefits, but might be a desirable option for those looking to get a degree or start a business, Wheaton said.

UAW representatives hadn’t returned phone calls as of press time, but Flores said the union hadn’t made its presentations to members yet. After the options are presented, employees will have 45 days and a seven day grace period to make a decision. The company is looking to have the workers who take the deal exited by July 1, Flores said.

After that, the company will open up the jobs to UAW workers at other plants in accordance with the rules set forth in the union’s agreement before opening up positions to outside candidates. Under the most recent GM-UAW agreement, new workers will be hired for half of what their predecessors were being paid, allowing the company to significantly scale back costs.

“This means a downward pressure on wages,” Wheaton said. “But, especially in this area, $14 isn’t a bad place to start. The UAW will lose a lot of their more senior people, but it does give some hope that the two-tier wage scale may bring in some new blood for the future.”

But how many people take the attrition program is still up in the air. No one will be forced to leave and for those that stay things will be business as usual, Flores said.

The turnaround will take some time with the sheer amount of money involved in the buyout, so the first half of 2008 might be a bit slow. But GM may see results sooner rather than later since the company is already spending approximately $130,000 per employee per year, Wheaton said.

“Even with a $140,000 buyout, it would only be a matter of months, not years, before they get that money back,” Wheaton said. “Then, every year after that they make a lot more money, especially after the cost savings from the VEBA (Voluntary Employee Beneficiary Association) kicks in after 2010.”

Contact reporter Daniel Pyeat 693-1000, ext. 158.