General Motors Corp and Chrysler LLC on Monday began offering a new round of retirement incentives including vouchers for cars as the automakers move to reduce workers and inventory.
GM will offer its US hourly workers $20,000 in cash and a $25,000 voucher to buy a vehicle as an incentive to retire or leave the company, an official with the United Auto Workers union briefed on the plan said. The No. 1 US automaker declined to comment.
Chrysler’s program offers retirement-eligible workers $50,000 in cash and a voucher of $25,000 for a new Chrysler vehicle if they leave, according to a person with direct knowledge of the offers. Workers who opt to leave Chrysler with no retiree health care benefits would get $75,000 and a $25,000 car voucher, the person said. Chrysler confirmed that it was offering a new round of buyouts to workers that would be available until February 25.
Both GM and Chrysler are under pressure to cut labor costs further under the terms of a $17.4-billion US bailout extended to the two struggling automakers. Under the terms of that emergency lending, Chrysler and GM face a February 17 deadline to show how they can cut debt, labor costs and other expenses in order to be viable in a deeply depressed market for new cars and trucks.
As Chrysler’s sales have tumbled, the automaker has slashed production, cut models and eliminated jobs. The automaker, controlled by private equity firm Cerberus Capital Management, has cut some 32,000 jobs, $3 billion in costs and about 30% of its production capacity. But sales continue to retreat. Chrysler led a sinking market lower with a 53%-drop in December sales, and analysts see a chance for a drop near 50% when it posts sales results for January this week.
Both GM and Chrysler have offered buyouts to trim factory payrolls in recent years. But the terms of the current round of offers appeared to be less generous than prior buyout packages. GM said last May that about 19,000 US factory workers -- just over a quarter of its blue-collar work force at the time - -- had taken buyouts to leave the payroll.
In September, Chrysler had offered some 14,000 factory workers in Michigan lump-sum payments of up to $100,000 plus tuition assistance and some support for moving. Many UAW workers have been reluctant to take the most recent buyout offers since the deep drop in the housing market has made it almost impossible to sell their homes.
GM and the UAW worked out details of the larger automaker’s early retirement offers on Monday, one union official said. Other UAW officials representing GM plants said they had been told that a package would be announced but had not yet been briefed on the details. Earlier this month, the union agreed to surrender a controversial provision of its contract with the automakers known as the “jobs bank” that had guaranteed nearly full wages and benefits for workers even after their jobs were eliminated.
In addition to concessions from workers, GM and Chrysler are also both looking for creditors to swap much of their debt for equity in the restructured companies.
Chrysler said in a statement that the challenging US auto market had prompted the automaker to offer a new round of buyouts for all its UAW-represented workers. It said the decision to make the offer had been made last year, although the automaker made no specific announcement at the time. “Given the difficult economic and market conditions in the US, Chrysler LLC determined in December 2008 that it would offer another phase of special programs,” Chrysler spokeswoman Shawn Morgan said. (Reuters)