DETROIT -- General Motors Corp. and auto supplier Delphi Corp. promised to cut jobs to restore the health of their ailing companies. On Wednesday, they kept their vows by unveiling one of the most sweeping buyout programs ever.
GM and Delphi said they plan to offer buyouts to more than 125,000 hourly workers under an agreement with the United Auto Workers. Around 113,000 GM workers will be eligible for early-retirement incentives or buyouts of between $35,000 and $140,000 depending on their years of service and whether they want to keep health care and other benefits.
At Delphi, GM's former parts division and largest supplier, 13,000 U.S. hourly workers will be eligible for a lump sum payment of $35,000 to retire. Also, up to 5,000 Delphi workers will be eligible to return to GM.
David Cole, chairman of the Center for Automotive Research and the son of a former GM president, said the deal is of historic proportions.
"It's huge, far more than I expected," Cole said. Cole said the deal could go a long way toward helping GM return to profitability and speeding Delphi's exit from bankruptcy.
The number of workers covered by the GM-Delphi buyout offer is enormous, but not unprecedented. For example, in 2003, Verizon Communications Inc. made a buyout offer to 152,000 workers, about half of them unionized technicians and call center operators and the other half non-union managers. About 21,600 of those employees accepted the deal, nearly double what the company had sought.
While the deal with the UAW would not be offered to as many workers, the dollars being offered are much richer than in most past buyouts, said John Challenger of outplacement firm Challenger, Gray & Christmas Inc.
"It's unparalleled in terms of the potential for the amount of money that will be paid out to blue collar workers," he said.
But the agreement leaves open many questions, including what will happen to the bulk of Delphi's 34,000 hourly workers. Delphi remains in negotiations with GM and its unions to lower its labor costs, which it puts at $75 an hour in wages and benefits, and has threatened to ask a bankruptcy judge to cancel its union contracts if it fails to settle by March 30. If the judge does cancel those contracts, the unions could call a strike that would cripple Delphi and GM.
The buyout deal comes at a critical time for GM, which increased by $2 billion its reported 2005 loss to $10.6 billion last week. The world's largest automaker has been losing U.S. market share to Asian automakers and is saddled with labor agreements that make it difficult to close plants or cut workers. GM shares rose a penny to close at $22.01 on the New York Stock Exchange.
The plan also is crucial for Delphi, the largest U.S. auto parts supplier, which filed for Chapter 11 bankruptcy protection in October. And the plan is painful for the UAW, which also recently agreed to unprecedented cuts in retiree health care at GM and Ford Motor Co.
"There's a cushion but it doesn't prevent the fall," said Harley Shaiken, a professor and labor expert at the University of California, Berkeley. "It eases the pain but it's not the same as having the stability of a successful company."
Under the plan, GM would pay for the Delphi early-retirement incentives and assume some post-retirement benefits for Delphi employees who go back to work for GM. GM spokesman Dan Flores said GM didn't yet know the full cost of the plans, since it's unclear how many workers will participate.
Himanshu Patel, an auto analyst with JPMorgan, said GM will likely pay around $2 billion for the Delphi buyouts based on recent financial filings, while Merrill Lynch analyst John Murphy estimated GM will spend "well in excess of $1 billion" on its own buyout plan.
Several analysts questioned how much GM can save, saying it will get near-term relief by cutting jobs but will add to its pension obligations. The company already has 2.5 retirees for every active worker.
Most workers that retire will get full benefits, which doesn't relieve GM's sizable pension obligations, Goldman Sachs analyst Robert Barry said in a note to investors. Barry added that savings gained from the retirement of younger workers could be offset by GM's assumption of Delphi retiree benefits.
The Delphi plan must be approved by the U.S. Bankruptcy Court. Delphi said it will ask a judge to consider the plan April 7. GM's plan doesn't require approval, and Flores said retirements could begin as early as June 1. Workers will have up to 52 days to decide whether to take the buyouts once they learn details in plant meetings.
Michael Balls, 49, a pipefitter at the Delphi steering systems plant in Saginaw, was cautious about his own options after reading details of the agreement.
"I feel a lot better, but I'm still questionable about some things," said Balls, who with 30 years of service is eligible for a $35,000 payout to retire. Balls said he might take the offer or he might return to GM if they will offer him a skilled trades job.
Detroit-based GM said the plan will move it toward its goal of cutting 30,000 hourly jobs by 2008. GM has slightly more than 113,000 workers, but only UAW-represented workers are eligible for now, Flores said. The automaker is negotiating with its other unions -- the International Union of Electronic Workers-Communications Workers of America and the United Steelworkers -- on a similar deal. Salaried workers won't be getting the buyout option, Flores added.
In a memo sent to local union leaders, UAW President Ron Gettelfinger and Vice President Richard Shoemaker said they will ask the bankruptcy court to approve the Delphi plan.
"Working out this agreement required an inordinate amount of time and patience due to the complexities posed by Delphi's bankruptcy filing," Gettelfinger and Shoemaker said in a statement.
Associated Press writer Adam Geller in New York contributed to this report.
On the Net:
Delphi Corp.: http://www.delphi.com
General Motors Corp.: http://www.gm.com
United Auto Workers: http://www.uaw.org