GM Halts Some Benefits, Plans to Trim More Jobs
Friday, October 24, 2008
General Motors is suspending a variety of benefit programs for its white-collar workers and slashing additional jobs to cut costs -- a move that comes as employers nationwide begin to re-evaluate the cost of retirement and health-care packages in an effort to ride out the economic downturn.
Cash-strapped GM, the largest of the Big Three Detroit automakers, plans to stop matching its nonunion employees' contributions to their 401(k) retirement savings plans beginning Nov. 1, the company said in an e-mail sent to its U.S. executives Wednesday. The company usually matches contributions of up to 4 percent of an employee's salary. On Jan. 1 the company also plans to shelve its scholarship program, as well as financial assistance for tuition and adoption.
As corporations across the country try to control their costs, employee benefits have taken a hit. In a recent survey of 248 companies by human resources consultancy Watson Wyatt, 21 percent said they have asked employees to pay a larger share of their health-care premiums and 11 percent have frozen or closed pension plans. Two percent have reduced matching payments to 401(k) and 403(b) plans.
Such cutbacks are not uncommon in down times. In the wake of the dot-com bust, a number of employers, such as the Charles Schwab brokerage firm, suspended 401(k) matching contributions. Cushman & Wakefield, a large commercial real estate company based in New York, told employees this week that it planned to halt merit raises and suspend its matching 401(k) contributions.
"Very few organizations go down that path if they can help it," said Shub Debgupta, a senior researcher at Corporate Executive Board in Arlington.
GM has struggled more than most big corporations in the downturn, a victim of falling sales and tight credit markets. Without specifying numbers, the automaker told employees that layoffs are likely later this year and in early 2009. These cuts follow a company offer to buy out some of its 9,000 salaried employees with a goal of cutting 15 percent of salary costs by Nov. 1.
"The global credit crisis has had a dramatic impact upon the industry at large, and new vehicle markets in North America and Western Europe have contracted severely," said a letter signed by chief executive G. Richard Wagoner Jr. and Chief Operating Officer Fritz Henderson. "The global economic outlook remains very concerning. As a result, actions are being taken throughout GM's global operations to address our increasing need to conserve cash."
GM is not the only automaker that is suffering. Chrysler announced yesterday that it will cut 1,825 jobs, as it shuts a Delaware plant a year ahead of schedule and slashes output at an Ohio facility.
Mounting worries about the troubled auto industry prompted members of the Michigan congressional delegation to send a letter to Treasury Secretary Henry M. Paulson Jr. and Federal Reserve Board Chairman Ben S. Bernanke yesterday, asking them to "use their broad regulatory authority" to "promote liquidity in the U.S. auto industry."
"They need to do for autos what they're doing for the mortgage industry," said Sen. Carl M. Levin (D-Mich.).
Vehicle sales have hit a 15-year low. While a $25 billion loan program to aid the domestic auto industry was rushed through Congress, it could take more than a year to infuse this money into Detroit.
"The federal government should consider all of its tools -- some recently enacted -- to support industries that are in distress and that are essential to the U.S. economy," said GM spokesman Greg Martin.