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GM, Ford air plans for big cuts

The automakers, beset by high costs and declining profit and market share, say that is the road to survival.

By TIMES WIRE
Published February 8, 2006

DETROIT - Both Ford and General Motors are employing dramatic plans to cut expenses, particularly benefits, and regain their financial footing.

GM, which says a return to profitability will require sacrifices from all involved, announced plans Tuesday to rein in white-collar pension and health care expenses, slash the dividend and trim executive salaries - moves some analysts say suggest it might seek benefit cuts from union workers.

Meanwhile, Ford Motor Co. is offering buyouts of $100,000 each to workers who lose their jobs to plant closures if they agree to give up all benefits except their pensions.

The severance option is among five being proposed to workers as Ford moves ahead with a plan to close 14 plants by 2012, affecting roughly 30,000 employees.

General Motors' cuts in health benefits for salaried retirees, planned changes to its pension plan for salaried U.S. workers and decision to cut in half GM's dividend all support the company's ongoing North American turnaround efforts, which already include plans to shed 30,000 hourly jobs and close 12 facilities by 2008.

GM has been under pressure from one of its largest shareholders, billionaire investor Kirk Kerkorian, to take more aggressive steps to revive profitability.

"Everybody's got a piece of it," GM chairman and CEO Rick Wagoner said at a news conference at GM's headquarters. "What we're trying to do is look at each piece and say, "Where are we really uncompetitive vs. the people we run against?' . . . If we're out of line, that's what we need to work on.

"So, it may not be exactly the same sacrifice everywhere, but I think just about everybody's got a piece of it."

The cut in its dividend alone will reduce GM's yearly cash payout by about $565-million. Cash savings from the health care changes will grow to about $200-million within five years, GM said, and then continue to increase after that.

GM, which is suffering from declining U.S. market share at the hands of its Asian competitors, lost $8.6-billion in 2005 amid high health, pension, labor and materials costs. Analysts said Tuesday's cuts could help provide leverage for GM in contract talks next year with the United Auto Workers. And it could help GM in talks with the union on a possible bailout for hourly workers of Delphi Corp., GM's former parts division, which filed for bankruptcy last fall.

Asked Tuesday whether GM's move might lead to future concessions by the union, however, UAW President Ron Gettelfinger said: "Absolutely not. We've done our share. We're ready to move forward."

Shares of GM closed down 53 cents, or 2.3 percent, at $22.81 in regular trading on the New York Stock Exchange.

Ford's $100,000 severance option is among five being proposed to workers as the company moves ahead with plans to close 14 plants by 2012, which will affect roughly 30,000 employees.

So far, the company is offering the deals to workers from idled plants in Edison, N.J., and Loraine, Ohio, Ford spokeswoman Marcey Evans said Tuesday. She said the company expects to start offering them soon to workers at the St. Louis factory scheduled to close by the end of March.

The company hopes to offer them to workers at all idled plants, but they must first be approved by the United Auto Workers in each location, Evans said.

Under Ford's current agreement with the UAW, which expires in 2007, the company can't permanently lay off workers without continuing most of their pay and benefits.

Ford expects to achieve half of the job cuts through attrition. The incentive options are designed to encourage the rest to leave voluntarily, Marty Mulloy, Ford's vice president of labor affairs, told the Detroit News.

"As difficult as these plant actions are, we want to try to minimize the impact on employees in so far as we can," he said.

Besides the $100,000 buyout, other offers include a tuition reimbursement program, two early retirement programs and a preretirement leave program for those just short of the 30 years needed to retire.

Workers opting for the tuition program will receive up to $15,000 per year for four years along with medical benefits and half their regular pay.

[Last modified February 8, 2006, 01:14:12]