47000 Hourly workers leave GM

Today, GM announced that over 47,000 of the 137,000 hourly workers at GM and Delphi have opted to take the buyout offered by the company. That’s about a third of the hourly workforce.

A few (under 5000) took a large cash payment (between $70K and $140K) and gave up their perpetual health coverage [perhaps they’re covered by a spouse’s plan]. The majority took the smaller payouts [upto $35K] but retained GM health benefits.

Evidently, this plan does not solve one GM problem: a huge healthcare liability stretching into the future. However, it does solve another important problem: too many workers, that the company could not fire because of the stupid contract they negotiated. (Many workers were staying home because the company did not need them, but were still being paid upto 90% of their wages!) Some analysts are now saying that too many workers left — and GM will have to hire temps, at higher costs. Instead, I think GM should “embrace their loss of market share”, by trimming low-margin products in the US.

GM has already done a lot to cut non-labor costs.

On its own, cutting costs cannot save a business. GM has to look to the revenue side of the P&L. That part of their move started in 2001, with the hiring of Bob Lutz. Recently, that has started to show results, with quite a few new models hitting the lots.

As a (itsy-bitsy) shareholder, I mostly like the way GM is attacking their problems (not everything about it). The change is not going to be easy, and there are many things that can bring it down. The two most important things for GM now are: to negotiate a good union contract in 2007; and, to continue to bring out interesting vehicles at ever lower prices.

Meanwhile, the story at Ford does not appear quite so full of possibilities. GM is in bad shape, but at least it is trying to do something meaningful about it. If it fails, it won’t be for lack of one last valiant effort. On the other hand, Bill Ford is telling people to cut the bureaucracy… all well and good, but hardly turnaround stuff. Recently they also have been hyping “work at Ford, buy a Ford”, which is truly an ominous sign. I wonder if Bill Ford Jr. will be the one to finally send the family firm into bankruptcy. Indeed, if Toyota buys Ford in a fire-sale (post-bankruptcy, with union contracts voided) SE Michigan may see an end to years of lagging the country economically. [I wonder of Toyota will keep Bill’s roof!]  [Update: Sept 5th. Bill Ford has stepped down as CEO of Ford.]

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2 Responses to 47000 Hourly workers leave GM

  1. softwareNerd says:

    Yup, good article.

    People don’t learn from history, just recently SAP’s workers voted in a worker’s-council! The Unions would love to “organize” the IT industry. Imagine a “UIW” replacing the UAW… yuck!

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