GM and Chrysler have decided to offer hourly employees buyouts to leave the companies and decrease their expenses again. That really isn’t that shocking considering that the companies are desperately trying to pare down expenses in order to meet the terms of a bailout for the industry but there are a couple of interesting points about this round of buyouts that are interesting:
The Old Gray Mare Ain’t Worth What She Used To Be
Last year GM was able to trim down a quarter of its workforce- about 19,000 hourly workers in all. But the employees who decided to bail before the bailout were offered a lot more money than the employees being asked to leave now. How much more? About $120,000 each! That is right- before the slide became the avalanche on the car lots last summer, GM was offering employees $140,000 each to voluntarily leave the company. Given that they also had to forgo health and insurance benefits when they left, it really isn’t that much of an offer in the scheme of things. The employees who were either not offered the buyout or turned it down now are going to be offered a buyout package at a deep discount of $20,000 to leave and a $25,000 voucher for a ….what else……a free car.
But The Wagon Maintained Its Value?
With photos coming out recently of excessively unsold inventories of cars piling up around the world it seems that the value of unsold cars would be plummeting but they aren’t. Yet. Imagine what happens when all of these employees who take the buyouts end up with cars they don’t need but have payments due for things that they do need, like housing. The cars will potentially end up on the market and at deeply discounted prices because the employees are now deeply discounted in their employment value. Call it a Former Employee Discount. And the dealers will not make a dime from these transactions because these cars will be sold on Craigslist.
Back On The Farm
Recent ‘temporary layoffs” have hit all of the Big 3′s plants and most do not seem to have an end in site. Usually the plants shut down for 2 weeks around the Christmas holidays but this year the holiday period is extending into mid-February at the very earliest for even some of the most successful plants, including GM’s Fairfax plant in the Kansas City area. Fairfax employees have been producing two of GM’s biggest successes: the Chevy Malibu and the Saturn Aura. Currently between employee compensations from GM (negotiated by UAW 31) and unemployment benefits the workers are drawing about 90% of their normal wages but the state has been slow in paying because of the sheer volume of sudden claims coming their way. Any suggested or the inevitable forced buyout will further strain the state which has until recently maintained better than average unemployment.
(I am curious if GM ever received a $146,000,000 bond initiative that was being presented if they would make a mid-sized car at the Fairfax plant because I am pretty sure that mid-size is the new Buick LaCrosse that was already in pre-production at the plant when they sent all of the workers home for their long winter nap.)
“Forced buyouts”, you ask? If employees don’t accept the package to leave then they probably will be given a ticket to ride. And that may not include a free car.
I heard a story last month about a GM employee who had worked in the marketing department for over 15 years but still made less than the people who worked on the lines for less than 10 years. When this marketing guy left he went to another company with a nice parting bonus from GM and a $75,000 increase in pay at the next company. His value went up while the workers on the line he used to resent are being devalued every day.