Author: Mike Colias

A group representing General Motors Corp.’s salaried retirees has sharply criticized GM’s plan to replace their pensions with an annuity handled by an insurance company.

The General Motors Retirees Association, in a June 13 letter addressed to GM CEO Dan Akerson and posted on the organization’s website, says it’s concerned that GM’s plan to shift the pension plan for white-collar retirees to Prudential Insurance Co. of America will eliminate federal insurance of their pension income.

“It is a matter of depriving [retirees] of the financial security that they earned,” wrote the association’s president, Jim Shepherd.

This month GM said it will spend $2.5 billion to $3.5 billion to buy a group annuity contract from Prudential to cover the pension payments of GM’s 118,000 salaried retirees and dependents. GM also said it would offer a lump-sum buyout option to 42,000 of those retirees.

The GM Retirees Association says that all salaried retirees—those who take the buyout and those who are shifted into the annuity—would lose the coverage provided by the federal Pension Benefit Guaranty Corp.

“You are abandoning the hard-earned benefit of an ERISA-protected pension promised to thousands upon thousands of GM retirees in return for their commitment and loyalty,” Shepherd writes in the letter, referring to the Employee Retirement Income Security Act.

A GM spokesman said the company received the letter and has called members of the association to discuss their concerns. He confirmed that Pension Benefit Guaranty Corp. will not back the pension plan once it is shifted to Prudential in January.

The spokesman said there are other protections built into its contract with Prudential. The insurer is required to form a separate fund to hold the pension assets, which would not be subject to any future claims by Prudential creditors. And annuities generally have coverage through state guarantee funds. Those protections vary by state.

“This is the first communication we’ve received from a group with concerns,” the GM spokesman said. “We take it seriously, and we’re working on getting them the appropriate response.”

The annuity deal is a core piece of GM’s strategy to reduce the risk of its massive pension obligation, which Akerson identified this week as one of the top risks the automaker faces, behind its sustained losses in Europe.

GM said the buyout offer and the shift of its salaried pension plan to Prudential should cut its U.S. pension liability by about $26 billion, a major step in its bid to reduce the $134 billion in global pension obligation on its books.

GM’s move to eliminate such a large pension liability by moving it to a group annuity contract is unprecedented, according to Pensions & Investments, a sister publication of Workforce Management.

“This is by an order of magnitude, the single largest [pension buyout] transaction both in the U.S. market and globally,” said Ramy Tadros, New York-based partner at Oliver Wyman Group, told the magazine. “They are the first ones to go through this and test the market reaction to a move like this.”

Under the plan, those who retired before Oct. 1, 1997, as well as any of the 42,000 who decline the buyout offer, will have their benefits paid by Prudential starting in January. The amount of the monthly checks would remain the same.

In April, Ford Motor Co. said it will offer 90,000 U.S. salaried retirees and former employees the option of receiving a lump-sum pension payout. It has not disclosed any plans to shift any of its pension plans into an outside group annuity.

The GM Retirees Association letter was reported June 15 by the Detroit Free Press.

Mike Colias writes for Automotive News, a sister publication of Workforce Management. Comment below or email editors@workforce.com.

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Mark Reuss wants General Motors employees to make customers so happy with their GM vehicle that they come back for another one. So he’s paying his workers extra when that happens.

Reuss, GM North America president, has instituted a new compensation structure that ties a portion of salaried workers’ bonus pay to GM’s customer loyalty in both sales and aftersales service at dealerships. It covers all GM North America salaried employees, including 29,000 in the United States, from engineers and vehicle designers to field reps.

Reuss says it’s the first time in his 26-year career—and likely in GM’s history—that the company will pay employees based on how well GM retains its customers.

“That is the ultimate result of why we’re doing all of this, right? People come back and buy our cars and trucks,” Reuss said.

The latest move builds on Reuss’ unrelenting mantra of customer loyalty over the past two years, ever since he was given sales responsibility for North America.

Reuss wants GM employees to look beyond the narrow scope of their job descriptions and keep their ultimate focus on the customer. In the past, divisional barriers meant that even if employees in one area were hitting their targets it often did not translate into success for GM.

“Everybody had their own metrics, which somehow were all green,” or positive, Reuss says of the old GM. “But, weirdly, when we added it up, it was pretty red.”

For 2012, salaried workers in North America will get a year-end bonus if GM hits an internal customer-retention goal. The company uses both third-party sales data and internal numbers to set a loyalty target, a spokesman says.

The customer-retention piece is now part of a broader compensation system GM implemented in 2011 that pays salaried workers a bonus for hitting a companywide target for vehicle quality. Reuss added the customer component for 2012. Employees were notified of the change in May.

The spokesman would not say how much money GM is offering for hitting the targets.

To drive home the point that customer-loyalty efforts transcend the dealership, Reuss last month added vehicle-quality duties to the responsibilities of his customer-experience czar, Alicia Boler-Davis. That gives the one-time plant manager oversight of both the quality of GM’s vehicles rolling off the assembly line and the level of customer satisfaction at its dealerships.

Chevrolet dealers have been asked to visit Walt Disney Co. resorts for tips on how to treat customers. Cadillac dealers have been immersed in the ways of the Ritz-Carlton luxury hotel brand.

But it is inside GM’s 650-person field sales division that the customer-centric pay structure probably reflects the most striking departure from GM’s past. For many years, zone managers and sales reps were expected to move the metal at any cost. Twisting dealers’ arms to take cars they didn’t want was routine.

Today, many dealers say they rarely are pressured to take cars. That’s partly a byproduct of GM’s restructuring: The 2009 bankruptcy and new United Auto Workers contracts pared production capacity and eliminated suffocating legacy costs such as the Jobs Bank, which paid workers whether they were building vehicles or sitting idle in union halls. So GM no longer has an incentive to produce more cars than demand requires simply to keep cash coming in.

But Reuss wants more from his sales force. He expects sales managers and reps to partner with GM dealerships to achieve his goal of making GM’s brands No. 1 in customer service within two years.

From his office desk on the 38th floor of GM’s Renaissance Center headquarters, Reuss plucks a freshly printed PowerPoint document, dated May 30, that amounts to a road map for changing the culture inside his sales operation. It’s filled with “GM values” such as employee engagement and “customer zealotry.” 

Mike Colias writes for Automotive News, a sister publication of Workforce Management. To comment, email editors@workforce.com.

 

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