My Fervent Hope

That I never get my business in a situation where I have to spend $45,000 just to lay off a worker.

General Motors is offering buyouts to virtually all of its remaining hourly workers, becoming the latest automaker to try to cut labor costs by giving nervous workers an incentive to leave the company.

The move follows a similar move by Chrysler LLC, which made an offer to its hourly workers on Monday.

The GM (GM, Fortune 500) offer, which takes effect Friday, is less lucrative than the deal proposed by Chrysler, or even offers that GM has made to its hourly staff in the past. The automaker will give most of its 62,000 U.S. hourly workers $20,000, as well as a voucher good towards the purchase of a GM car worth $25,000.

In the past, GM offered between $45,000 to $62,500 to workers to retire early, and $140,000 to employees who left the company and agreed to give up post-retirement health care coverage. Those offers were all cash.

Seriously, is this driven by GM contracts, or is this just GM's choice as an alternative to firing everyone?  There are cases when it makes sense for a company to go through the added expense of worker buyouts vs. layoffs.   The buyouts avoid the bad press of a layoff, they help maintain the company's reputation in the remaining workforce and community, and may not be a bad investment for a company temporarily on hard times that knows good times, and the need to hire more quality employees, are just around the corner.

But seriously, do automakers really have anything to lose at this point to lose?  And if the main reason for buyouts over layoffs is reputational, is this really what we want our tax money funding, the maintenance of the good name of GM management?

  • It's all about the union contracts. If they can't bribe people to leave voluntarily, they have to keep them. I worked for a major railroad carrier for many years - this is all very familiar to me.

  • max

    yes, they need a good reputation, when they come to bailout-doorsteps once again. Then, they can say: See, we care for the well-being of the common worker, therefore we are eligible for more money...

  • morganovich

    this is going to go over smashingly as part of the required "plan to solvency/profitability over the next couple weeks...

  • Dr. T

    $45,000 isn't enough.

    Would you give up a $100,000 per year job that offers full health insurance, a big retirement package, and six weeks of vacation per year for less than half a year's pay?

    These semi-skilled workers will never find another job this good. I believe that only workers close to retirement will take the offer.

  • Mesa Econoguy

    Seriously, is this driven by GM contracts, or is this just GM’s choice as an alternative to firing everyone?

    The Big Three’s Big Three
    Severance, pensions, and health benefits
    STEPHEN SPRUIELL

    Any successful business must be able to respond to fluctuations in demand for its products, but GM’s job-security agreements with its unions make that process burdensome and costly. The workers at the Moraine plant belonged to IUE-CWA, an electrical workers’ union. As a result of the plant closure, IUE-CWA was able to negotiate buyouts of $70,000 to $140,000 for any worker who voluntarily quits. Other workers were made eligible for early retirement.

    ...

    GM employees who stay with the company and are laid off will qualify for GM’s supplemental unemployment benefits, meaning that GM will make up the difference between their former wages and their state unemployment checks. When those checks run out, GM will pay these workers 95 percent of their former wages for up to two years, depending on seniority. Workers with at least ten years of seniority are eligible for the Job Opportunity Bank Security program. This is the notorious jobs bank that allows laid-off workers receive their regular hourly pay to sit around and work crossword puzzles or read the paper. If GM offers them an opportunity to transfer to another plant, they have the right to turn down a limited number of such offers. And if no offer is made, they can stay in the jobs bank until they retire. GM currently has around 1,400 workers nationwide in the jobs bank.

    Peter Morici is a professor of international business at the University of Maryland. In late November, he testified before the Senate Banking Committee, alongside the CEOs of the Big Three automakers and United Auto Workers president Ron Gettelfinger. “The real problem here is that [Banking Committee chairman Chris] Dodd doesn’t understand the scope of the severance payments that the UAW gets,” Morici tells me. “They go in the jobs bank and they stay there forever. My feeling is that [the Big Three] are at fault for letting the jobs bank continue after these last labor negotiations and agreeing to $105,000 buyouts. The whole situation is absurd.”

    John Heitmann, an automotive historian at the University of Dayton, agrees. “We can’t really compete when we have those kinds of contracts,” he says. “It’s the health care, it’s the seniority, and it’s the work rules. In flush times, when life was good and you could sell many different vehicles and particularly trucks at very high profits, GM could survive like that. But it was just a matter of time before things caught up with them.”

  • MJ

    Well, at least we know where the bailout money is going. The automakers couldn't offload their costly pension and health care obligations, so they are giving them to the American taxpayer -- back door, rather than directly through the PBGC.

  • markm

    Normally, there would be one advantage to buyouts like this. You get rid of workers who can't look a few months ahead when they've spent their buyout and are never going to find another job like the one they gave up. However, right now the ones that take the money and run might be smarter than the ones that stay - quite possibly until there are no jobs and no money for severance pay. There won't be jobs like the UAW jobs ever again, but there are some thriving businesses in Michigan, and the first to take the severance pay will be the first in line for new jobs. Or, they might use the cash and their new gas-hog to get out of the state...