A CONTRAST IN CUTS: GM's plans left little doubt for its workers

[69Firebird400]

A CONTRAST IN CUTS: GM's plans left little doubt for its workers

January 24, 2006

BY MICHAEL ELLIS

FREE PRESS BUSINESS WRITER



Both General Motors Corp. and now Ford Motor Co. have announced massive cutbacks over the past two months that combined will result in the loss of 26 plants and up to 60,000 hourly jobs over the next three to six years.

As devastating as those cutbacks sound, Ford's Way Forward plan left many questions unanswered and marked a different approach from GM's.

On Nov. 21, GM said it planned to cut 30,000 jobs and stop production at a dozen North American facilities, including four in Michigan, by the end of 2008. GM laid out a timetable for its plant cutbacks, leaving little doubt about the fate of workers.

Conversely, Ford didn't set specific dates for when it would idle most of its plants, and it didn't give a complete list of which facilities would be targeted, leaving workers in the dark. Ford's goal of cutting 25,000 to 30,000 hourly jobs also is stretched out further, until the end of 2012.

Ford said it would target 14 manufacturing facilities, including seven vehicle assembly plants. But it named only five of those sites, including three assembly plants, on Monday. Two other assembly plants will be named later this year, and two more assembly plants will be disclosed beyond that, Ford said.


More: http://www.freep.com/apps/pbcs.dll/a.../1014/BUSINESS

[rcf8000]

The news stories about the layed off workers say nothing about the workers being paid after they're layed off, but that would seem to be a critical factor in assessing the cost savings to the company. Can anyone explain to me what the situation is? I read somewhere that the workers continue to draw their full salary after they're layed off. How long does this continue?

[johnny smallblock]

Originally Posted by rcf8000

The news stories about the layed off workers say nothing about the workers being paid after they're layed off, but that would seem to be a critical factor in assessing the cost savings to the company. Can anyone explain to me what the situation is? I read somewhere that the workers continue to draw their full salary after they're layed off. How long does this continue?

If I were a betting man I'd say until about 2007 or so when the UAW contract is up. The Big 3 will do a lot to get rid of that jobs bank. Maybe phase out the number of years (or months) you can be in the bank.

[tgagneguam]

The Today Show (a reliable news source, I know) indicated that the workers would draw between 90-95% of their salaries til the end of their contracts, which I believe is 2007 for both GM and Ford. Afterwards, I'm unclear of their fates. Depending on seniority, some may be able to retire early and still have access to a reduced pension and full healthcare benefits, though I'm much less clear on that point.

The situation is a bit complicated, though, as I've also heard that some of these workers will be offered "buyouts," in which they receive a year's salary and are then cut off completely from the company, including pensions and healthcare. I believe that that applies specifically to the white collar workers.

If you read the reports, it would appear that the 6,000 or so white collar workers (and don't for an instant believe that that applies to the "fat cats;" I'm guessing those affected are the relatively lower-level sales and service managers) are being cut out far sooner, some starting in April of this year, than the assembly line workers. I guess it illustrates the benefits of working with a Union representing your interests.

The buyouts offer shortterm pain for longterm gain for their respective companies, obviously. The lingering UAW workers in the Jobs Bank, as discussed to a great extent on this site, cost the company significantly.

[GMCtruck]

I don't remember the exact details, but I recently read an article that said Ford was going to help pay to retrain displaced workers and also help cover their living expenses while they attend school. You have to give Ford some credit for helping ease the pain for displaced workers which is better than just throwing them out on the street with severance pay and unemployment benefits.



I think Ford is playing it smart by phasing in their plan over time and making adjustments as necessary. Yes, some amount of job uncertainty will remain for employees, but there is no such thing as guaranteed job security at most large corporations these days. All it takes is a downturn in business or the economy to bring out the axe again.

[69Firebird400]

Although it sucks for GM and Ford to have to continue paying a large percentage of salaries to idled workers in the dreaded "job bank," even paying these folks 100% of their salary would still reduce costs because the idled plant's fixed costs - lighting, electricity, heat, etc. - would be reduced if cars are not being built there.

These jobs cuts are interesting to me, though, because I seem to remember the UAW being a little aghast at GM's cuts, because (and I don't have any idea what the specifics of the collective bargaining agreements say) these cuts are something that has to be bargained with the UAW. Should be an interesting year until the agreements expire.

[rcf8000]

The Detroit News has some detailed information as to the benefits for layed off UAW members. Apparently, the workers do get close to full pay until the contract expires.
Talk about uncertainty--the negotiations for the new contract in 2007 should be a real battle. Presumably, the layed off workers could continue to get benefits after that, unless the company really stands firm.

[joey]

Of course, both Ford and GM have money to invest in plants in Asia. All the talk of these plants being built for local sales are a joke. These plants are for export plain and simple. Of course with no one left working in this country, I wonder where their new auto sales will come from.

[953228]

Originally Posted by joey

Of course, both Ford and GM have money to invest in plants in Asia. All the talk of these plants being built for local sales are a joke. These plants are for export plain and simple. Of course with no one left working in this country, I wonder where their new auto sales will come from.

Solid analysis, let's criticize GM and Ford for building plants in Asia, especially since so many Americans have proven they have no problem buying foreign cars. Also, if GM is focused on moving North American production overseas how do you explain GM building Lansing Grand River and Lansing Delta Township? The 2-3 Billion it has cost building those two plants could have build 5-10 plants in China and Korea.

[GMCtruck]

Originally Posted by joey

Of course, both Ford and GM have money to invest in plants in Asia. All the talk of these plants being built for local sales are a joke. These plants are for export plain and simple. Of course with no one left working in this country, I wonder where their new auto sales will come from.

That may be true. But the bottom line is that the US automakers can no longer afford the UAW expenses and remain competitive. If the UAW stands firm, then GM/Ford may have no other option but to move production outside the US. Many companies have already done that even without having to deal with union contracts. I'm not saying that unions are necessarily bad, but they have become too unaffordable for most companies. The old ways of doing things has to change and it's going to be a very painfull pill to swallow for many people who are still used to the good old days.

[big swede]

Originally Posted by tgagneguam

The Today Show (a reliable news source, I know) indicated that the workers would draw between 90-95%

It's 50-80% based on years served until the contract expires in 07' which sounds like a lot until you see a Ford executive get a bonus worth 20 million in 04'. Don't know what it was last year.

[vdoh182]

If i was the id beef up my quality control enough to be able to trace cars, specifically ones with problems, back to who built them just in case angry workers start building **************** cars.

[Geotpf]

Originally Posted by 69Firebird400

Although it sucks for GM and Ford to have to continue paying a large percentage of salaries to idled workers in the dreaded "job bank," even paying these folks 100% of their salary would still reduce costs because the idled plant's fixed costs - lighting, electricity, heat, etc. - would be reduced if cars are not being built there.

These jobs cuts are interesting to me, though, because I seem to remember the UAW being a little aghast at GM's cuts, because (and I don't have any idea what the specifics of the collective bargaining agreements say) these cuts are something that has to be bargained with the UAW. Should be an interesting year until the agreements expire.

It reduces costs on these things, but it also reduces sales. Also, there are non-salary-related fixed costs (insurance, property taxes, the mortage on the plant, etc.). Basically, if you lose a hundred dollars a car, but if you make fewer cars, you may lose even more money.

It appears that Ford and GM can shut down whatever plant they want to without the union having any say in the matter, but everybody goes into the Job Bank and gets 90% of thier salary.

Now, the key here is that in 2007, when all the union contracts are up, you can bet that Ford and GM will push for the elimination of the Job Bank. Whether or not the UAW is willing to go along with that is unclear. Probably not, unless they get other benefits (major salary increases). This could cause a strike, I think.

[Geotpf]

Originally Posted by 953228

Solid analysis, let's criticize GM and Ford for building plants in Asia, especially since so many Americans have proven they have no problem buying foreign cars. Also, if GM is focused on moving North American production overseas how do you explain GM building Lansing Grand River and Lansing Delta Township? The 2-3 Billion it has cost building those two plants could have build 5-10 plants in China and Korea.

I can see a scenerio that goes something along this:

1. Ford and GM demand the end of the Job Bank.
2. The UAW refuses and strikes.
3. Ford and GM then shift production overseas.

GM is in a great position to do this, at least with thier car models, given enough lead time. I can see all domestically sold cars, other than high end models, being built by Daewoo in Korea. Trucks and SUVs are harder, but you could build plants in Mexico for those. If GM's fourth quarter results are as bad as I think they are, and continue to be so, they could convincingly threaten the union with this.

Frankly, one of the points of the union is to make profits of the company as close to zero (but not negative) as possible, with the money going to increased salaries instead. Completely understandable. If the company is actually losing money, however, that is a problem the union will recoginize.

[uujjj]

Daewoo in Korea? Yeah right. The unions in Korea make the UAW look like cute little kittens.