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GM, Chrysler Finalize Plans To Restructure
Chrysler has completed the majority of its downsizing since it began an aggressive restructuring campaign two years ago. The company has cut $3 billion in fixed costs, reduced manufacturing capacity by one-third, trimmed the workforce by about 32,000 employees and discontinued four unprofitable models.
The United Auto Workers has also made important concessions, agreeing to create a health-care trust that would shift the multibillion-dollar burden of retiree benefits away from the automakers. A recent collective bargaining agreement also reduced new-hire wages.
The automakers' new plans aim to accelerate their transformation. Using their original December viability plans as blueprints, they have begun to clarify the details of their cost-cutting. Last month, both automakers ended their "jobs banks," a program that paid furloughed workers.
Then last week, GM announced plans to cut 10,000 white-collar jobs worldwide, including 3,400 in the United States. Salaries for the remaining staff will be temporarily cut as much as 10 percent through the end of 2009.
GM is seeking further concessions from the UAW, and negotiations continued late last night. Under the Bush administration, the Treasury sought to reduce UAW compensation to levels competitive with foreign manufacturers'. Another key issue in the talks is whether a portion of a pending company payment to the union-run health-care trust fund could be made in company stock rather than cash.
In recent weeks, both GM and Chrysler have offered their workers a range of early retirement and buyout offers, which could help close the gap. For example, GM offered employees a $25,000 voucher for a new GM car or truck and $20,000 in cash; about 22,000 of its employees were eligible.
If enough employees accept such offers, the automakers could significantly lower their average wages -- most current workers earn $28 an hour, but new hires start at $14.
"These companies are doing what companies in bankruptcy do to avoid bankruptcy," said Gregg Lemos-Stein, an analyst with Standard & Poor's.
The restructuring efforts extend beyond GM and Chrysler. Ford is also suffering from falling sales and is burning through its cash, though it has yet to ask for government help. Last week, auto parts suppliers, struggling with their own losses as vehicle sales decline, requested their own multibillion-dollar government bailout.
Obama's auto industry task force will include Ron Bloom, a restructuring expert and former vice president of investment bank Lazard Freres who has advised the United Steelworkers union, and Diana Farrell, the president's deputy economic adviser who has worked for McKinsey and Goldman Sachs.
Some analysts said an oversight team, versus a single car czar, could help the union in its negotiations.
"A panel not czar means there will be more White House influence on what's being done," said Gary N. Chaison, professor of industrial relations at Clark University in Worcester, Mass. "The UAW will have more protections in rewriting their collective agreement."
Staff writers Peter Whoriskey and Brady Dennis contributed to this report.