Nearly 7,500 Workers Opt to Leave GM as Detroit Three Seeks Additional Ways to Cut Overhead

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Researched by Industrial Info Resources (Sugar Land, Texas)--Buyout offers have been nothing new in the automotive sector in recent years. Since 2006 General Motors Corporation (NYSE:GM) (GM) (Detroit, Michigan) has made early retirement and buyout offers to its workers three times, with more than 60,000 employees accepting. Ford Motor Company (NYSE:F) (Dearborn, Michigan) and Chrysler LLC (Auburn Hills, Michigan) have also made similar offers during this time period.

During the latest round of buyout and early retirement offers at GM however, the majority of the employees who have accepted, 7,500 to be exact, will take early retirement rather than the buyout. This may be due to the fact that this latest offer was not nearly as generous as previous deals. GM offered $20,000 cash and a $25,000 car voucher to all of its 62,400 hourly workers in the United States, a significant reduction from previous offers.

Chrysler made a similar offer to hourly workers this year as well and extended the deadline to entice more workers to accept, a clear sign that the number of workers opting to accept the offer on this occasion was not as high as the automaker was hoping. Chrysler has not yet announced when the extension will run out. Ford has also made early retirement and buyout offers to its 42,000 hourly workers. At Ford, workers can accept the offers from April 1 to May 22.

In addition to the buyout offers, the automakers are being creative in how they are staffing and operating facilities. With automotive sales falling month after month, production has far exceeded sales. To offset these flagging sales, the Detroit Three have been alternating shifts at their assembly plants. One week the first shift will work, while the second shift is told not to report. The following week, the reverse happens. This technically keeps all the workers employed but allows the automakers to cut back production.

The automakers have also been forced to shut down facilities to curb production numbers when the alternate shift program is not effective enough. Some plants have been closed for as long as two weeks, oftentimes giving very little notice of the closure. The previously announced permanent closings of some plants has helped to a degree, but in several cases the actual closures have not occurred yet, leaving automakers with operational plants and production capacity that they do not need.

As both GM and Chrysler seek more money from the Federal government simply to remain in operation, additional cuts are certainly going to be necessary. Additional permanent plant-closure announcements could be seen before the end of the year, not only at GM and Chrysler, but at Ford as well. Another round of buyout and early retirement offers by 2010 would not be unexpected. GM has pledged to cut 47,000 jobs worldwide as it reorganizes itself into what it hopes will be an efficient operation once again. The bottom line remains that the automakers cannot live off of the taxpayer indefinitely. As Congress digests the reorganization and vitalization plans that the Detroit Three have to submit by the end of this month, the key question will be can these massive companies return to viability in the near term, or will one or more of them have to face bankruptcy.

Industrial Info Resources (IIR) is a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, as well as multimedia services.