GM and Chrysler To Offer UAW Buyouts

Both GM and Chrysler announced plans today that will offer buyouts for their senior UAW workers. Both companies wish to replace the experienced, higher paid union workers with new, lower cost ones. Instead of paying a worker 28 dollars per hour, they can hire people for half as much. The auto companies will avoid paying the higher salaries and extra benefits by offering the buyout.

Ultimately, both companies need to get their payrolls more in line with the foreign companies in order to comply with the requirements of the next round of government loans. I wonder if this amounts to too little too late for these deeply troubled companies?

From Automotive News:

General Motors joined Chrysler LLC today in offering a new round of hourly worker buyouts and retirement incentives to cope with the industry downturn and meet federal labor-saving requirements for the automaker's rescue package.

Chrysler and GM notified UAW locals of the plan today, said two union sources who asked not to be identified. Automotive News, which today first reported the Chrysler buyout plan, obtained a copy of the Chrysler notice.

GM spokesman Tony Sapienza declined to comment on the matter.

Chrysler confirmed the buyouts this afternoon. In a statement, the company said workers have between Feb. 2 and Feb. 25 to elect to leave.

"Given the difficult economic and market conditions in the U.S., Chrysler LLC determined in December 2008 that it would offer another phase of special programs," the statement said.

Chrysler and GM want to move veteran workers off its rolls to eventually bring on hires who will earn half the $28-an-hour wage of current veteran workers and half their benefits. Chrysler employs about 38,000 workers represented by the UAW, while GM employs 71,000.

The carmakers also must bring its labor costs in line with Japanese transplant automakers by Feb. 17. That's when Chrysler is required to justify a federal rescue loan of $4 billion. General Motors has the same timeline to justify a federal loan commitment of $13.4 billion.

UAW spokeswoman Christine Moroski declined to comment.

Chrysler's incentives are more generous than those offered by GM.

Retirement-eligible Chrysler workers who leave will receive a $50,000 incentive plus a voucher of $25,000 for a new Chrysler vehicle, according to the notice. Last year the incentive was $70,000.

GM hourly workers who retire are eligible for $20,000 in cash and a $25,000 car voucher, according to a UAW source.

About 18,000 GM hourly workers took larger buyout incentives in 2008 to leave the company.

Chrysler workers who take a buyout and leave with no retiree health care benefits get $75,000 and a $25,000 car voucher, the union source said. The incentive was $100,000 last year. GM buyouts offer $20,000 and a $25,000 car voucher.

Another group now is eligible for full retirement benefits at both automakers: workers age 55 or older with 10 years of service, according to the sources.