Parachutes soften economic landing after GM job cuts

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Sunday, May 11, 2008
— When General Motors cuts its Janesville production this summer, workers laid off by the automaker and its local suppliers will have financial parachutes to soften their economic landing and lessen the impact on the local economy.

But the size of those parachutes differs widely. Some workers could see their pay plummet. Others will glide for three years with nearly full pay.

GM, which now employs about 2,300 hourly workers in Janesville, will cut second-shift production in July. The move will eliminate at least 750 hourly jobs.

In response, two Janesville companies in GM’s just-in-time supply chain will lay off significant parts of their workforces.

Lear Corp., which makes seating and interior systems for GM’s line of full-size sport utility vehicles, is expected to lay off between 275 and 350 of its 670 hourly employees. Lear employees make between $15 and $20 per hour.

LSI, which sequences and delivers parts to the GM plant, plans to lay off 132 of its 235 hourly workers. Those workers earn wages that are lower than those paid by Lear.

Of the 3,200 hourly jobs at GM, Lear and LSI, a minimum of 1,150 jobs will be lost.

But because of the strength of the GM workers’ contract and their unemployment benefits, the loss in jobs will only reduce the combined pre-tax weekly pay of GM, Lear and LSI workers by slightly more than 8 percent.

How many GM employees sign up for a pending retirement and buyout program could alter the community’s weekly income loss.

General Motors

Before there’s any action on the layoff, GM’s hourly employees must decide whether to participate in the company-sponsored special attrition package. In trying to get its own financial house in order, GM has offered the package as a way to shed workers across the country.

Depending on whether they are in production or skilled trades, workers with 30 years of service or more can retire with an incentive of $45,000 or $62,500 and keep their GM pensions and health care benefits.

A pre-retirement program for employees with 26-29 years of service will pay monthly benefits as a bridge to full retirement at 30 years.

Employees at least 50 years old with 10 years service can leave with a pension and benefits based on age and length of service.

Workers with 10 or more years can sever all ties with the company—including benefits—and take a cash buyout of $140,000, while those with fewer than 10 years can take $70,000.

No matter their tenure, some workers will not sign up for the attrition program that has a deadline of May 22. Instead, they will hang on and see where they fall on the seniority roster when the plant makes its layoffs.

Conventional wisdom suggests that workers who know they will lose their jobs will take advantage of the attrition program and leave with cash in their pockets.

But that’s not necessarily the case, particularly for those workers who don’t need GM’s money right away to start a business or some other venture.

That’s because laid-off GM workers will continue to receive the majority of their take-home pay for years to come.

Here’s why:

Upon their layoff, the workers will start to receive state unemployment compensation checks that in most cases will be at the maximum of $355 per week. Supplemental unemployment benefits that were negotiated into their national contract will boost that state check to the level of about 95 percent of the worker’s pre-tax weekly take-home pay.

When state unemployment runs out after 26 weeks, SUB pay will increase to cover the loss of state unemployment and continue for another 22 weeks.

When 48 weeks of unemployment and SUB pay are exhausted, probably sometime early next summer, the workers will move into GM’s Jobs Bank and return to full pay, even though they are no longer working in the plant.

While in the Jobs Bank, workers must accept job transfers to other GM facilities or be cut completely from the automaker’s wage and benefits programs. As GM continues to cut jobs at many of its plants, the likelihood of a transfer is largely dependent on a worker’s seniority.

When it’s all said and done, GM workers laid off this summer will keep their health insurance benefits and receive a minimum of 95 percent of their take home pay until 2011, when the United Auto Workers and GM negotiate their next national contract.

Lear Corp./LSI

Unlike their brothers and sisters at GM, workers at these two supplier plants don’t have a buyout or early retirement package in front of them. They’re left to wait for this summer’s layoffs and see if their seniority is enough to keep them on the payroll.

If they are laid off, these workers won’t get SUB pay. It’s not part of their contract.

That means they’ll be looking at a minimum of 26 weekly state unemployment checks that max out at $355.

The weekly difference between the maximum state unemployment pay and the take-home pay of Lear and LSI is expected to be more than $50,000 for the 400 or more employees expected to be laid off.

Extended benefits

Affected workers at GM and LSI could get Trade Adjustment Assistance that would extend benefits for up to 130 weeks.

Lear employees already have been certified for TAA benefits.

The UAW and GM are expected to petition the U.S. Department of Labor for TAA status, which is granted when workers are displaced by global competition. In the past, some auto-related layoffs have been approved for TAA, which basically continues to pay unemployment benefits when the state program has expired.

But other layoffs have not been approved for TAA status, said Geoff Upperton, president of the Rock County Central Labor Council and an education-training director for the AFL-CIO.

“Chrysler tried it twice and was denied both times,” he said. “Nothing is set in stone when it comes to TAA.”

For TAA benefits and the associated rules, the Labor Department might look at LSI workers differently because they do not manufacture anything. They could be certified for the benefits if the department classifies the loss of their jobs as GM-related, he said.

To receive TAA benefits, however, workers must be enrolled in some sort of job training program and do job searches. TAA allows up to $15,000 for additional education and re-training for eligible workers.

Typically, TAA benefits run for 52 weeks, but they can be extended as long as 130 weeks if the worker remains in approved job training or needs some sort of remedial education.

The Wisconsin Department of Workforce Development has said it will work with GM and the UAW to petition for the benefits.

Last updated: 9:11 pm Thursday, December 13, 2012

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