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GM hits the brakes

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JAMES P. LEUTE
April 28, 2008
— General Motors’ officials announced production cuts Monday to eliminate one shift of workers at the assembly plant in Janesville.

Starting July 14, GM will make SUVs on one shift. At that time, there will also be a change in the line speed. Currently, there are two shifts doing 44 vehicles per hour. In July, the one shift will be cranking out 58 jobs per hour.


State statutes require companies to notify state Department of Workforce Development of mass layoffs. GM officials said they are in the process of notifying the state. They estimated the number of workers affected to be 750, but GM officials characterized that number as "fluid."


Salaried workers will be affected proportionately.


The elimination of one shift in Janesville would appear to be GM’s response to skyrocketing gas prices and continued sluggish SUV sales.


About 2,500 hourly employees now work two shifts at the plant. Hundreds of others work at local companies that supply the GM plant. On its face, the elimination of one shift would involve about 1,250 jobs at GM and several hundred others throughout the local economy.


Just how many GM employees would be affected by the move is uncertain because the automaker has early retirement and buyout offers on the table.


Last fall’s national contract agreement between GM and the United Auto Workers set the stage for the buyout and retirement offers. While guaranteeing some jobs, the deal allows the automakers to hire “second-tier” workers at wage and benefit rates that are expected to be about 50 percent below what current UAW members are paid. For most positions, new hires would be paid about $14 per hour.


With a May 22 deadline looming, sources have indicated that more than 200 people have already signed up to leave the Janesville plant. GM announced the offers amid concerns about the strength of the U.S. economy and the possibility that truck and car sales could slump more in 2008.


A similar buyout program in 2006 resulted in more than 900 Janesville workers—about 26 percent of the local workforce—leaving the plant.


With today’s expected announcement, the number of workers taking the current buyout offer could grow as employees learn what the automaker has in mind for the Janesville plant.


For months, the sluggish economy and rising gas prices have prompted questions about how long Janesville could continue production with two full shifts.


In February, GM North America President Troy Clarke told The Janesville Gazette he expected the second half of 2008 would be better for GM’s full-size SUVs, which also are made at plants in Arlington, Texas, and Silao, Mexico.


With the backdrop of the slumping economy and higher gas prices, Clarke was asked how long Janesville could continue to run both shifts.


“Right now, we need those plants, and that’s what we’re going to continue scheduling,” Clarke said in February.


When pressed further, Clarke said: “We have no announcements to make on capacity at this time. What we really want them to do is make a whole lot more of these great products.”


Today’s expected announcement appears to have everything to do with GM’s long-term forecast for the full-size market and nothing to do with the United Auto Workers recent strike against American Axle.


Since the February strike against the GM supplier, production at the Janesville plant has been cut by 50 percent.


Some analysts said the American Axle strike and related production cuts would help GM in the short term by allowing it to reduce large inventories of SUVs and pickups on dealers lots.


Apparently, inventories haven’t fallen far enough, and GM is sticking with its forecast for falling SUV sales.


The average price of a gallon of gas hit $3.53 last week, up 67 cents from a year ago, according to AAA. Oil closed above $118, up from $100 a barrel just a few weeks ago.


“Gas prices have exceeded our expectations,” said Mike DiGiovanni, GM’s executive director of global markets and industry analysis, told reporters last week.


He added that high gas prices are causing American consumers to buy smaller, more fuel-efficient cars.


BUYOUT DETAILS

General Motors and the United Auto Workers rolled out a special attrition program earlier this year to all of GM’s 74,000 UAW-represented employees. Workers in Janesville must sign up for one of the plans by Thursday, May 22, and the automaker wants to wrap up the plan at all its plants by July 1.


The details:


-- Retirement pension incentives of $45,000 for production workers or $62,500 for those in skilled trades positions. An employees can take the incentives as a one-time, lump-sum cash payment, as a rollover into his or her GM 401(k) or Individual Retirement Account, as a monthly annuity or as a combination of a partial lump-sum payment and direct rollover into the 401(k) or IRA.


Other retirement options would allow employees who are at least 50 years old with 10 or more years of service to retire with a pension payment and full benefits.


-- Employees with 26 to 29 years of service will be allowed to grow into the “30 and out” retirement package. Until they reach 30 years of credited service, employees would receive a fixed monthly payment with full benefits.


-- Cash buyouts for employees who agree to voluntarily quit and sever all ties with GM. Employees with 10 or more years would get $140,000, while those with fewer would receive $70,000.


Read more in our special section on the GM cutbacks.

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