Historic Union Deal Will Pare Down GM

Buyouts Offered to Tens of Thousands

Ed Wolff works at Delphi Corp.'s plant in Dayton, Ohio. About 13,000 Delphi workers are eligible for the buyouts. (By David Kohl -- Associated Press)

General Motors Corp.'s offer of buyouts to tens of thousands of older, high-wage factory workers yesterday is the latest effort to transform an outmoded U.S. auto giant besieged by more nimble global rivals.

The landmark agreement among GM, the United Auto Workers union and parts maker Delphi Corp. -- a former GM subsidiary now in bankruptcy protection -- offers employees $35,000 to $140,000, based on seniority and age.

It is unclear how many of the auto goliath's 105,000 hourly workers will take the buyouts, though a significant portion are expected to. About 13,000 workers at Delphi -- GM's largest parts supplier -- will also be eligible for the buyouts.

Once the cornerstone of American manufacturing and cultural might, GM is laden with massive pension and health-care costs for its hundreds of thousands of retirees and their families. Meanwhile, vehicle sales have been hammered by high fuel costs while increasing waves of foreign rivals hit U.S. shores, shrinking GM's once-dominant market share from more than 50 percent to about 26 percent.

"GM invented the modern corporation, and it worked really well, but now it's over," said Sean McAlinden, the chief economist at the Center for Automotive Studies. "This is the end of 20th-century industrial America and hopefully the beginning of 21st-century industrial America and a globalized auto industry."

Under the new deal, GM and Delphi hourly employees -- mostly factory workers -- have a range of options to leave the two companies. For instance, workers with 10 or more years of seniority can take a one-time payment of $140,000 to sever all ties to GM and Delphi. The workers would keep their accrued pensions but lose health-care and other post-retirement benefits. Employees with less than 10 years can chose a one-time payment of $70,000 to walk away under similar circumstances. As many as 5,000 Delphi workers could move back to GM jobs based on a condition of GM's 1999 spinoff of Delphi.

Workers over 50 years old with at least 10 years on the job can retire immediately with full health-care and pension benefits. GM said it didn't know the full costs associated with the buyout. The deal requires approval of the bankruptcy court judge in the Delphi case.

If a large number of workers take the buyouts, yesterday's agreement will slash company payroll costs and may help quell troubles extending beyond GM. At Delphi, UAW members had threatened a strike, as management demanded hourly wage cuts of more than one-half. Yesterday's deal somewhat reduces the likelihood of a costly Delphi strike that would have further destabilized cash-strapped GM and potentially engulfed the industry.

But some industry experts said the deal only temporarily relieves the burden of pension and health-care costs without fixing the problem.

GM pioneered generous benefits for workers, mainly the so-called "30 years and out" paradigm that guaranteed lifetime employment and retirement. But now, because of skyrocketing health-care expenses and intense global competition, GM says it can no longer afford the bills.

Worker reaction to yesterday's news was mixed. Some UAW members who posted to online forums complained that the union had sold out its membership.

Todd Jordan, a 27-year-old machine operator at a Delphi plant in Kokomo, Ind., said he will encourage co-workers not to take the offers. He said more focus needs to be placed on mismanagement at GM and Delphi as the source of the companies' woes.