In the largest employee buyout in U.S. corporate history, General Motors Corp. said yesterday that nearly a third of its 113,000 manufacturing workers in the United States have agreed to quit or retire this year in return for cash payments of as much as $140,000.
The program will cost GM nearly $4 billion, but it is expected to save money in the long run by reducing the automaker's health care and pension costs as it struggles to reverse huge losses and adjust to its diminished share of the U.S. auto market.
G. Richard Wagoner Jr., GM's chairman and chief executive officer, said at a news conference in Detroit that shedding 35,000 unionized workers would increase the company's cost reductions by $1 billion a year going forward. All of the job cuts would be effective by the end of 2006, he said.
Wagoner said 30,400 workers chose to take an early retirement incentive, meaning GM will retain liability for their pensions and health care. An additional 4,600 workers took buyouts, severing all ties with GM in return for cash payments of $70,000 to $140,000.
"These numbers are higher than we had budgeted," Wagoner said. "It makes us more cost competitive and this is for sure going to free up resources to be able to invest even more in products and technology."
The GM workers are represented by the United Auto Workers and the International Union of Electrical Workers-Communications Workers of America.
In the Baltimore area, UAW Local 239 President Fred Swanner said 123 workers still on the payroll at GM's van assembly plant on Broening Highway and 40 workers at the Allison transmission plant in White Marsh accepted buyouts. They have until midnight Friday to change their minds.
Also yesterday, Delphi Corp., GM's largest parts supplier and a former subsidiary, said that 12,600 of its unionized manufacturing workers in the United States have applied for a GM-funded early retirement program.
A separate buyout offer to another 14,000 Delphi workers expires late next month. Delphi spokesman Lindsey Williams said the company expects more employees to accept another offer, announced June 9, of buyouts ranging from $70,000 to $140,000.
The Delphi buyouts could help it avoid a costly strike by allowing the automotive parts supplier to cut its work force without a confrontation with the UAW. Delphi is still working on negotiating a new labor contract with the UAW.
Delphi filed for Chapter 11 bankruptcy protection in October and has said it intends to close 21 of its 29 U.S. factories and cut some 24,000 jobs from its manufacturing payroll - a 75 percent reduction - as it struggles to stay alive.
GM has agreed to cover the costs of the Delphi buyouts and early retirements under a cost-sharing plan negotiated when it spun off the parts maker in 1999.
Wagoner said he would be unable to disclose the total financial impact of the GM and Delphi "accelerated attrition" plans until the automaker files its second-quarter earnings report next moth.
He earlier had estimated that GM's huge restructuring, a program instituted last year as the company tallied mounting losses from its North American automotive operation, would shave $7 billion annually from operating costs. The employee buyouts bump that to "at least" $8 billion, he said yesterday.
GM lost $10.6 billion last year and has seen its share of the U.S. market shrink steadily for several decades in the face of fierce competition from foreign automakers, particularly Japan's Toyota Motor Corp.
Wagoner, who said GM is "coming very readily on the road back" to profitability, announced a turnaround plan late last year that included closing 12 U.S. and Canadian plants and cutting manufacturing employment by at least 30,000 jobs by 2008.
The buyout and early retirement results announced yesterday put the company "two years ahead of schedule" on the job cuts, Wagoner said.
GM already has cut its UAW work force heavily - down from 266,000 in 1993 - and yet it still hasn't been able to post strong profits consistently. GM suffered its worst year financially in 2005 since it nearly went bankrupt in the early 1990s.
GM announced the buyout numbers after the stock market closed. Its shares closed up 78 cents to $27.75 yesterday, and rose 34 cents to $28.09 after hours.
John O'Dell writes for the Los Angeles Times. Sun reporter Allison Connolly and the Detroit Free Press contributed to this article.