Top US Carmaker Looks to Trim Workforce

Topics:  General Motors

Michael Bowman
February 12, 2008

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Amid record losses, the largest U.S. automaker is offering buyouts to tens of thousands of unionized workers. From Washington, VOA's Michael Bowman reports.

Buyouts are a common strategy for companies hoping to trim labor costs. Typically given to workers with seniority, the idea is to offer a lump sum enticing enough for an employee to voluntarily leave the workforce, but that will save the company in salary and other costs over the long term.

American automaker giant General Motors is offering buyouts of up to $27,000 to all hourly wage earners represented by the United Auto Workers union, more than 70,000 workers in all.

GM Chief Executive Rick Wagoner says the buyout offer will give employees flexibility when planning their finances.

"It offers our workers eligible to retire a broader range of options under which to do so, including things like taking payments and rolling them into a 401K [retirement account]," he said.

It is not known how many workers will take the offer, but GM has a union agreement that will allow the company to replace as many as 16,000 workers with new employees earning about half as much on an hourly basis.

GM reports its losses totaled nearly $39 billion last year, a record sum. Trimming labor costs will not, by itself, return the company to profitability, but it will help, according to Michigan-based auto analyst Eric Merkle.

"We believe that as they get some of those older, more veteran workers out of the mix, that it should help alleviate some of that overhead cost structure," he said.

Rick Wagoner admits GM faces further challenges ahead.

"[In] 2008, we want to keep improving our automotive profitability globally," he said. "That may be a tough assignment, with the U.S. economy apparently weak for a while."

GM's sales have, on the whole, looked brighter in foreign markets than domestically. GM, like all U.S. automakers, has lost market share at home to imports from Asia and Europe. Japan-based Toyota recently replaced Ford as the number-two seller of automobiles in the United States.