Is this good news or bad news?
About 35,000 hourly workers at General Motors Corp. have taken buyout or early retirement offers, surpassing the company’s expectations as it tries to cut costs by paring its hourly work force, GM Chairman and CEO Rick Wagoner said Monday.
The good news seems to be that both these companies (Delphi has over 12,000 hourly workers leaving their employ) will be leaner enterprises.
This leaves one huge question.
The exodus has been more sizable than anticipate by management.
Chairman and CEO Rick Wagoner said he was surprised by the numbers. But he said the number of takers will allow the Detroit company to reach its target reduction of 30,000 manufacturing jobs by Jan. 1, two years ahead of schedule.
GM previously announced plans to cut its 113,000-person U.S. hourly work force by 30,000, closing a dozen plants by 2008.
The question remains: Will these companies now be able service their customers as well as before?
Because so many people are leaving, both GM and Delphi will have to scramble to keep plants and assembly lines running by recalling laid-off workers, bringing in transfers from other plants and hiring temporary workers.
It's a bit ironic that they might have to hire workers because so many workers are leaving. But what both GM and Delphi are getting out from under is the burden of contracts that are suffocating them.
Wagoner said the exodus will allow GM to dramatically reduce the number of workers in the “jobs bank,” where laid-off workers get most of their pay and benefits even when they’re not working.
Workers leaving will get buyouts based on their years of service.
Based on preliminary numbers from GM, about 4,600 employees accepted buyouts and about 30,400 chose to retire. It is expected that most will retire or leave the company by the end of the year, GM said.
GM offered buyouts of $140,000 for workers with at least 10 years of service, while those with less than 10 years would receive $70,000. The workers would cut nearly all ties with the company except for vested pension benefits.
And that's another important aspect of this. Allowing these 2 companies to get out from under the heavy burden of long-term benefits.
Now all the rest of the work force has to do is to get ready for an influx of a lot of people hitting the job market in the next year or so. We'll see how that ripples through the economy.
Comment Preview