GM offers buyouts to all hourly workers

GM follows a move by Chrysler to further cut labor costs, offering its factory workers the chance to cash out.

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By Chris Isidore, CNNMoney.com senior writer

NEW YORK (CNNMoney.com) -- General Motors is offering buyouts to virtually all of its remaining hourly workers, becoming the latest automaker to try to cut labor costs by giving nervous workers an incentive to leave the company.

The move follows a similar move by Chrysler LLC, which made an offer to its hourly workers on Monday.

The GM (GM, Fortune 500) offer, which takes effect Friday, is less lucrative than the deal proposed by Chrysler, or even offers that GM has made to its hourly staff in the past. The automaker will give most of its 62,000 U.S. hourly workers $20,000, as well as a voucher good towards the purchase of a GM car worth $25,000.

In the past, GM offered between $45,000 to $62,500 to workers to retire early, and $140,000 to employees who left the company and agreed to give up post-retirement health care coverage. Those offers were all cash.

Chrysler's offer is for to $50,000 to virtually all of its 27,000 U.S. hourly workers, along with a voucher good for up to $25,000 on the purchase of a vehicle.

"Given our financial situation, we feel this is a responsible," said Sherrie Childers Arb, a GM spokeswoman. She said the company has not set a target for how many workers it wants or expects to take the offer.

The UAW agreed last week to eliminate a so-called "jobs bank" at GM as well as at Chrysler and Ford. The jobs bank had provided near full pay to UAW members whose positions were eliminated.

Childers Arb said the company believes a significant number of workers will take the offer, even if they had turned down previous, more generous offers, especially with the elimination of the jobs bank and the restructuring going on at GM.

"We hope as many who are eligible to take the program, take it," she said.

Neither Chrysler nor the UAW are commenting on the buyout offer there. According to a letter from UAW vice president General Holiefield, the head of the union's negotiating team with Chrysler, he negotiated the new offer with Chrysler because of the rising concern among some members about the company's future prospects.

His letter said that many workers may have accepted the earlier package if they had known about the end of the jobs bank and other difficulties facing the company. The letter was posted on one of the UAW local's Web site.

Some retirement-eligible workers at Chrysler plants that are set to close could get up to $115,000 in cash in addition to the $25,000 voucher. The packages are similar to ones Chrysler offered to its hourly workers late last year, although the voucher replaces part of the cash that was offered in 2008.

GM offered buyouts to all 74,000 of its U.S. hourly workers in 2008 and had about 19,000 leave the company. Ford had about 7,000 of about 54,000 workers take various buyout offers. Chrysler did not have buyout figures immediately available.

If more workers take the latest offers from GM or Chrysler than the companies want to cut, the 2007 labor deal allows them to hire new workers at a significantly lower pay scale, and with far less lucrative benefits than those who were on staff when the 2007 deal was struck.

David Cole, chairman of the Center for Automotive Research, said the fact that the latest offer includes a voucher for a car, rather than all cash, is a sign of the need to preserve cash, as well as the realization that workers might be willing to leave with less money in their pocket this time around.

"As people become more scared, a bird in the hand is worth two in the bush," he said. Cole said if enough workers chose to leave Chrysler, it could increase the chance that Chrysler would chose to combine with another automaker rather than hire new workers.

The GM offer comes ahead of sales reports from major automakers due later Tuesday what are expected to show exceptionally weak January sales. It could end up being the worst month for the industry since 1982.

Sales tracker Edmunds.com is forecasting that GM sales fell 38%, while it expects Chrysler sales will plunge 48% from a year ago, the largest drop expected among the major automakers.

GM and Chrysler were both in danger of running out of the cash they needed to operate at the end of last year until they received a $13.4 billion in emergency loan from the Treasury Department.

Under terms of the loan, both companies must show progress towards bringing its labor costs in line with those at the nonunion U.S. plants of Asian automakers such as Toyota Motor (TM) and Honda Motor (HMC), or risk having the federal loan recalled. To top of page

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