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GM to Entice Young to Retire

August 1, 2008

DETROIT _ General Motors Corp. is looking to offer full retirement benefits to U.S. salaried workers as young as 58 in its effort to reduce its salaried workforce by almost 5,000 by Nov. 1 under a sweeping effort announced earlier this month to bridge it to better times in 2010.

Although the company says details of early retirement packages have not been finalized, executive managers in the United States started meeting this week with longtime salaried employees to share the general structure of the deals they expect GM to offer to U.S. salaried employees in August.

GM is mandating a 15 percent reduction of its U.S. and Canadian salaried workforce _ about 4,900 employees _ as part of the cost-cutting efforts it has instituted to respond to a weak U.S. economy and high gas prices that have driven a dramatic shift in consumer preference away from trucks to more fuel-efficient cars and crossovers.

“We are not disclosing a specific percentage, and the details of the window retirement have not been rolled out yet, we’re certainly not in a position to speculate,” GM spokesman Dan Flores said Wednesday.

Salaried employees who have been briefed say GM appears to be planning to offer full pension payments and six months of separation pay to workers 58 and older with at least 10 years of service. Typically, workers must reach age 62 to qualify for 100 percent of their pensions.

Those same employees said their managers expect workers age 55 to 57 to be offered enhanced pensions and six months of separation pay. Some salaried employees who already have reached retirement age are expected to be encouraged to take their pensions and six months of separation pay.

The salaried employees said their managers cautioned them that the retirement incentive plans are not final and could change, but they were informed of the general structure and thinking behind the plans so that they could begin considering their futures.

Other people familiar with planning for the GM salaried staff cuts confirmed that supervisors have begun meeting with staffers about expected plans.

They also said that the 15 percent cuts GM is targeting will not be instituted across the board. Some departments or job functions may have greater or lesser mandates for cuts. In addition, those people said, a slightly smaller percentage of takers may be acceptable if a large number of high-paid executives accept the offers.

Although GM has not confirmed the exact number of salaried workers it is targeting in the United States and Canada, several people familiar with planning cited the 15 percent figure. It’s not clear whether offers would go to Canadian salaried workers.

GM is believed to employ about 30,400 salaried workers in the United States and about 2,500 in Canada. A 15 percent cut would reduce GM’s salaried workforce by more than 4,900, reducing the total salaried workforce in the two countries to fewer than 28,000.

GM has said that it expects buyout and retirement offers to be effective, because it hasn’t offered a deal like this to its salaried workforce since 2005.

A report from the Center for Automotive Research in Ann Arbor indicates that nearly 30 percent of the Detroit automakers’ combined salaried workforce is 50 and older.

GM Chairman and Chief Executive Officer Rick Wagoner announced plans to cut U.S. and Canadian salaried cash costs by 20 percent on July 15 as part of an effort to generate $14 billion to $17 billion in cash through the end of 2009. GM expects to save $1.5 billion with salaried cost-cutting.

GM announced the cost-cutting and fund-raising measures to quiet concerns on Wall Street that the giant automaker might run out of money before 2010 and be forced to file for bankruptcy. GM’s stock price rose following the actions, and talk of bankruptcy has quelled. But exactly how GM will execute many of its plans _ including how many salaried employees it will cut and what it will offer them _ has yet to be officially detailed.

GM already has announced detailed plans for cutting 287,000 units of truck production by the end of the year, and Wagoner has acknowledged that the company is entertaining discussions with parties interested in buying the Hummer brand. GM also has begun cutting back on marketing spending and agreed with the UAW to postpone a payment to its retiree health care fund.

GM is scheduled to announce what Chief Financial Officer Ray Young called “a significant second-quarter loss” on Friday.

Wagoner has said that the company hopes to avoid involuntary layoffs and achieve its staff cuts with buyouts, retirement incentives and attrition.

Many of the cuts are likely to be felt in Michigan. In 2007, 92.4 percent of the three Detroit automakers’ U.S. engineers and technicians worked in Michigan, according to the Center for Automotive Research. By 2016, the research institute forecasts, that the number will drop to 79 percent.

All of Detroit’s automakers are in the midst of cutting costs and workforces to align their operations with depressed auto sales and plummeting market share. Ford Motor Co. is in the process of cutting 15% of its North American salaried costs, and Chrysler LLC recently announced plans to cut 1,000 salaried jobs globally by September.

All of the automakers have been cutting their hourly ranks as well. GM has persuaded more than 53,000 hourly workers to leave the workforce with buyouts or retirement incentives since 2006. Since 2005, all three Detroit automakers and their former parts arms have eliminated or announced plans to eliminate nearly 150,000 U.S. and Canadian automotive jobs.

Kristin Dziczek, director of Center for Automotive Research’s automotive labor and education program, said there still will be hiring at GM and other automakers.

“I think what gets lost in the buyouts of these older workers is there are still positions that will need to be backfilled,” Dziczek said. “There are positions in advanced technologies where there will be hiring. There may even be hiring before the end of this year.”

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(c) 2008, Detroit Free Press.

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