GM, UAW Considering New Employee Buyouts

 |  Includes: DDAIF, F, GM
by: Steven Towns

While United Auto Workers members vote on an unprecedented two-tier compensation plan from General Motors (see full story), the UAW and GM are also said to be separately considering a new round of early-retirement and buyout packages. The Wall Street Journal reports sources say higher-wage workers are being targeted in order to replace them with newer workers at lower compensation levels. GM may be able to have as much as one-third of its UAW labor under a so-called "second-tier wage and benefit plan" at a cost of around half the customary UAW-GM plan, with replacement workers under the plan over a period of three years. The UAW is said to benefit from the increased likelihood of a new labor deal attributed to acceptance of buyouts, also resulting in more full-time opportunities for part-time workers. Separately, Bloomberg reports sources say Ford and Chrysler are balking at the idea of contributing as much as GM to create a union-run retiree health fund. GM has pledged nearly $30 billion to remove it from about $50B of retiree healthcare-related costs. Only 30% of Ford and Chrysler UAW members are eligible for retirement within five years, compared to more than 60% at GM. In unrelated news, nearly 99% of DaimlerChrysler AG's shareholders have voted to rename the company Daimler AG, following the recent sale of the Chrysler division to Cerberus Capital Management.

Sources: Bloomberg, Wall Street Journal I, II
Commentary: Could the UAW Buy GM?GM-UAW Deal Good News For StockholdersGM-UAW Contract Introduces Two-Tier Pay
Stocks/ETFs to watch: GM, F, DAI
Earnings call transcript: General Motors Q2 2007, Ford Q2 2007

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