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From the Detroit Free Press:

PLAN FOR SURVIVAL: Up to 113,000 eligible for GM buyouts, opening door for Delphi exits

March 23, 2006

BY MICHAEL ELLIS

FREE PRESS BUSINESS WRITER

Faced with a potential strike that could ravage Michigan's auto industry, General Motors Corp. struck a historic deal with Delphi Corp. and the UAW on Wednesday to cut tens of thousands of blue-collar jobs, and is planning a dramatic reduction of its engineering ranks.

The Free Press has learned that GM is preparing to unveil plans Tuesday to streamline engineering operations, slash costs and move some jobs overseas. The number of engineering jobs to be cut is not known. Engineers at GM's Tech Center in Warren have dubbed the day Black Tuesday.

The deal reached Wednesday ends months of speculation for hourly employees. Coming after months of negotiations and public rancor, the agreement paves the way for GM and Delphi to offer more than 100,000 U.S. hourly workers incentives to leave the company. The staff cuts would save them billions of dollars in labor costs -- depending on how many accept the offer -- and position them for a more competitive future following one of GM's worst years ever, analysts who cover the industry said Wednesday.

Delphi still faces difficult negotiations with the UAW over salary and benefits cuts and plant closings that could result in a strike if they fail to reach an accord.

"This is the fundamental restructuring that they have needed for a very long time," said David Cole, director of the Center for Automotive Research in Ann Arbor. "I would say things are looking a lot better today than they were yesterday."

As hourly workers ponder whether to accept the buyouts, GM engineers said they believe GM's next move will be to cut their ranks. GM has booked about three dozen conference rooms at the Warren Tech Center to deliver the news, according to several engineers who declined to be named for fear of retribution from the company.

The engineers said GM told them to bring their company cars to the offices in Warren on Tuesday. Trips to GM's proving ground in Milford have been canceled, and workers have been told to stay in their office that day, they said.

Workers in Milford also said that about half of their conference rooms have been booked by human resources, and people who are on vacation or otherwise out of town have been told to be at work that day.

Engineering jobs in Europe and elsewhere also will be eliminated, said one GM executive familiar with the plan.

"There will be a right-sizing of the U.S. and European vehicle engineering groups," the GM executive said. "Where there's duplication of engineering among North America, Europe and South America, you can eliminate it and reduce the number of people involved."

In November, GM said it would cut its U.S. salaried staff levels by 7% this year. GM spokesman Robert Herta declined to confirm or deny the job cuts Wednesday. If GM made any such move, he said the automaker would first inform its employees.

While engineers await more news, GM revealed an extensive plan Wednesday to cut hourly jobs.

GM will offer most of its 113,000 U.S. hourly workers incentives to retire or quit the company, while Delphi will give 13,000 of its 23,000 UAW workers the chance to retire. In addition, up to 5,000 Delphi workers eligible for the early-retirement deal could return to work at GM, where they would retire with full benefits.

Workers will have to sift through the details of the package to figure out if a buyout is financially lucrative for them.

Under the terms of the deal:

GM and Delphi workers already eligible to retire -- a total of about 43,000 workers -- would receive $35,000 to voluntarily retire.

Workers with 27 years to 29 years of service could quit working, but they would be paid roughly 60% of their monthly wages until they reach 30 years of service with GM. At that time, they would retire and receive their full pension and health care benefits.

Workers at five GM plants that have closed or stopped production, including the Lansing Craft Centre vehicle assembly plant, will be offered the same deal. However, workers there with 26 years of service also are eligible to quit working and be paid nearly 60% of their monthly wages until they reach 30 years of service.

GM workers, but not Delphi workers, also could accept more lucrative buyouts worth from $70,000 to as much as $140,000 to sever their ties to GM. They would lose any health care and other post-retirement benefits.

Reaction to the deal was mixed from Delphi and GM workers.

Gyorgy Vida, a 51-year-old worker at GM's Romulus engine plant, said older workers may take the buyout, but a onetime payment wasn't enough for him.

"It's not worth a damn," Vida said. "That money will be gone in no time at all."

Several Delphi workers, many fearful of the company's plans for more severe cuts, welcomed the deal.

"A lot of people are talking about that they're going to take the offers," said Reymundo Vargas, 48, a worker with 30 years' seniority at Delphi's East Operations plant in Flint. "It seems like a good deal."

The deal certainly will thin the UAW's already shrinking ranks. The union, one of the largest in the United States, has about 640,000 members, down from about 1.5 million in the late 1970s.

The job cutbacks could avert a train wreck for the automotive industry, but for the Michigan economy, it may mean more people packing up and moving from the state, leaving neighborhoods already dotted with "For Sale" signs.

Ford Motor Co. also plans to offer early-retirement or buyout packages to thousands of workers, including many in Michigan. Several large automotive suppliers, in addition to Delphi, also have declared bankruptcy in recent months, forcing them to cut jobs.

Wednesday's deal will accelerate GM's efforts announced in November to eliminate 30,000 hourly jobs in North America by the end of 2008, and several analysts said the automaker could exceed that goal. GM says it thinks it will be the largest retirement package ever in U.S. corporate history.

"Depending on take rates, GM's announcement today could result in notable hourly headcount reductions above and beyond those announced in November," said Himanshu Patel, a Wall Street analyst with JP Morgan.

Even with the long-sought deal behind them, negotiators from GM, Delphi and the UAW will return to the bargaining table today to try to hammer out a broader labor deal for the automotive parts supplier.

The early-retirement deal has reduced the threat of a strike, but not eliminated it, analysts said.

Negotiators are racing against a March 30 deadline, when Delphi has said that it must have a broad agreement that cuts jobs, closes plants and reduces wages and benefits.

If an agreement is not struck by then, Delphi repeated on Wednesday that it will ask a U.S. bankruptcy court in New York to void its union contracts, a move the UAW has warned would result in a strike against the company.

That would quickly force GM, Delphi's largest customer, to shut most of its plants across North America, just as it battles to recover from last year's losses of $10.6 billion.

Delphi has said that it wants to cut 24,000 of its approximately 34,000 U.S. hourly workers, close plants and cut wages and benefits.

The Troy-based automotive parts supplier lost money for most of the years since it was spun off from GM as a separate company in 1999. In October, Delphi sought Chapter 11 bankruptcy protection from its creditors.
 
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