Author: Site Staff

Employing the efficiency of an automotive assembly line, General Motors has laid off close to 3,400 salaried workers in recent months, moving individual employees from their desks and out the door in a half-hour’s time.

The GM layoffs are part of a last-ditch effort to “right-size” its workforce in order to avoid the kind of bankruptcy filed by Chrysler on Thursday, April 30.

Yet it looks like the latest round of layoffs is just that—the latest round, giving employees who remain at GM little relief.

May 1 marked a soft deadline for accomplishing the first round of layoffs. It also marked the beginning of a pay cut—3 to 10 percent, depending on a person’s rank—for many of the remaining 26,250 salaried workers in the U.S.

Now the company is looking to its next major deadline of June 1, when, according to a regulatory filing last week, GM said it would run out of cash unless it receives more financing and debt relief. In the filing, GM said it expected additional manpower reductions among its salaried workforce. The company also said it would trim its hourly workforce by 7,000 more than it had outlined in its first restructuring plan submitted February 17. 

Current and recently laid-off GM workers spoke about the last few weeks at GM on condition of anonymity because they were afraid to lose their jobs or their severance pay. They describe an atmosphere in recent months of uncertainty as executives were tasked to cut 10 percent of their workforce.
 
“We were on pins and needles forever,” said one longtime employee who was spared the cuts.

Cuts were made based on whether a person’s position was deemed redundant, the level of their subject-matter expertise, and performance reviews, current and former employees said.

Those laid off say they knew when it was going to happen because conference rooms—used to deliver the bad news—were booked for an entire day under the guise of GMU, which stands for GM University, the company’s employee training program.

“They tried to disguise it as training, but we knew what it was,” said another laid-off employee.

Employees who were laid off say they met with their supervisor and an HR manager in the conference rooms, where they were told they would have to sign papers as part of a severance agreement. Laid-off salaried employees are receiving one month’s pay for every two years worked up to six months’ severance, said GM spokesman Tom Wilkinson.

Workers also get up to three months of job placement help from such firms as Philadelphia-based Right Management, Wilkinson said.

After another HR manager came to confiscate employee phones, computers and other property, laid-off employees left. GM allowed employees to keep their company cars for one month. The entire process took less than a half-hour.

“The automotive industry is one of the modern marvels,” said one employee who was laid off. “There’s no other industry in the world that can move as much material as efficiently. … There’s no reason why the exit process wouldn’t be as honed.”

—Jeremy Smerd

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Workers and supervisors thinking about buying out their companies shouldn’t let emotions overrule good sense in today’s tough economy.

Employee and management buyouts of struggling firms rarely succeed, said Bernard Jacques, a labor and employment attorney at law firm Pepe & Hazard.

“In a distressed situation, it’s usually just a last gasp before it goes under,” said Jacques, whose firm has offices in Connecticut and Massachusetts.

It’s difficult to get a precise figure on the number of employee and management-owned businesses in the United States. The National Center for Employee Ownership research group estimates that there are some 11,400 companies that have employee stock ownership plans, stock bonus plans or profit-sharing plans primarily invested in employer stock. That number is up from just 1,600 in 1975, according to the Oakland, California-based center.

Companies that share ownership broadly with employees are less likely to go out of business, said Corey Rosen, executive director of the center. Such firms also generate more jobs and create on average three times more retirement benefits than nonemployee ownership companies, he said.

“But the success these companies have is not simply a matter of sharing stock,” Rosen said. “To work, employee ownership companies have to set up a culture of high employee engagement in decisions affecting their work.”

Rosen said most employee buyouts of companies occur when a stable firm is sold by private owners to the employees, who borrow money against their stock ownership plan. Of the thousands of companies with significant employee ownership, 100 or fewer are the result of workers buying a troubled firm, he estimates.

“It’s not the way it’s typically done,” he said.

In March, a management buyout resulted in a new firm called Global Steering Systems. Managers from a unit of manufacturer DriveSol Worldwide teamed up with outside investors to buy DriveSol’s global steering division, headquartered in Watertown, Connecticut. The operation was slated to shut down and eliminate about 240 jobs, according to the Connecticut Development Authority, a quasi-public agency that loaned the new firm $2 million.

The unit was hit hard by the auto industry crisis last year, said Joseph Harpie, chief lending officer of the agency.

But Global Steering Systems’ management had a good business plan, which included funding from sources including a Chinese company, says Marie O’Brien, president of the Connecticut Development Authority. The agency, whose funds were slated for additional machinery and the purchase of intellectual property, expects 135 jobs to be saved.

O’Brien’s agency aims to spur the state’s employment and intellectual capital through favorable loan terms.

Connecticut officials are open to helping with other employee or management buyouts. But long-term viability is key.

“It has to make good business sense,” O’Brien said.

—Ed Frauenheim

Workforce Management’s online news feed is now available via Twitter.

 

The Chrysler bankruptcy filing Thursday, April 30, could result in lower federally guaranteed pension benefits for Chrysler employees and retirees if the financially troubled automaker later jettisons its massively underfunded plans.

In a new question-and-answer guide about Chrysler’s pension plans, the federal Pension Benefit Guaranty Corp. notes that a bankruptcy filing can result in a reduction of benefits if plans are later taken over by the PBGC.

For example, under law, the PBGC does not guarantee benefits earned after a bankruptcy filing. The PBGC provides in its guide an example of a company that filed for bankruptcy on July 1, 2009.

Two years later, the PBGC took over the company’s pension plans. In that example, the PBGC would not guarantee benefits earned after July 1, 2009.

In addition, in such a situation, the maximum benefit the PBGC would guarantee to a plan participant would be linked to the amount set for 2009, not the maximum limit that would apply for plans terminating in 2011.

Auburn Hills, Michigan-based Chrysler sponsors 10 pension plans that are covered by the PBGC insurance program. Chrysler’s pension plans, as of November 30, 2008, had about $9.3 billion in unfunded benefits, according to the PBGC, of which about $2 billion would be guaranteed by the PBGC if the plans are terminated.

The carmaker’s plans have about 255,000 participants.

If the plans are terminated, it would be the PBGC’s fourth- or fifth-biggest loss, depending on the current value of the plans’ assets and liabilities, and the largest termination in terms of the number of plan participants affected.

The PBGC’s biggest plan takeover, in terms of loss to the agency’s insurance program and number of participants in the plans, was the 2005 termination of United Airlines’ four pension plans. The plans had about 122,000 participants and $7.5 billion in unfunded PBGC guaranteed benefits.

Chrysler has not filed a notice with the PBGC that it intends to terminate the plans.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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The recession likely will boost group health care costs higher than employers anticipated, leading more organizations to shift more costs to employees and adopt lower-cost consumer-driven health plans, according to a survey released Thursday, April 30.

Employers surveyed by benefit consultant Mercer of New York now expect health care costs to rise by an average of 7.4 percent this year. That compares with a 6 percent average increase employers predicted in a 2008 Mercer survey.

One possible reason for the higher-than-expected increase is increased utilization of health care services, according to the survey. In fact, 15 percent of the 428 responding employers said medical plan utilization has been higher than expected.

Mercer consultants said it isn’t surprising that employees and their dependents would step up their use of health care services during a recession.

More employees, fearful of being laid off, want to get medical tests and have health care services completed while they still have employer-based coverage, said Beth Umland, Mercer’s director of research for health and benefits in New York.

With costs going up at a time when many employers can least afford it, many intend to shift more costs to employees next year.

For example, 47 percent of respondents said they are likely to increase the percentage of premium employees pay in 2010.

In addition, 22 percent of employers say they are likely to add consumer-driven health care plans—either a CDHP linked to a health savings account or a health reimbursement arrangement—in 2010.

“This will be a boon to CDHPs,” said Linda Havlin, Mercer’s global leader for research and knowledge management in Chicago.

Increased employer interest in CDHPs during a recession is not surprising, given that this type of plan costs much less than other health care plans, according to Mercer.

In 2008, Mercer found that HSA-based CDHPs cost an average of $6,027 per employee, compared with an average of $7,815 per employee for more traditional preferred provider organization plans.

The survey also found that more employers were in favor of broad health care reform legislation that would require employers to offer a health care plan or pay a fee to help fund coverage for the uninsured, and a requirement that all individuals be covered in a health care plan.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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The Labor Department is asking for public comments as it and two other federal agencies prepare to develop rules for a law that requires employers to offer the same level of insurance coverage for mental health disorders as they do for other medical conditions.

The 2008 mental health care parity law takes effect next year.

Information sought by the agencies—the Labor Department, Treasury Department and Centers for Medicare and Medicaid Services—includes: the financial impact of upgrading health care plans to comply with the mandate; which provisions in the law require clarification from regulators; how out-of-network coverage for mental disorders differs from out-of-network coverage for other medical conditions; and whether any special consideration should be given to small employers.

The request for comments was published in the April 28 edition of the Federal Register.

Comments are due by May 28 and can be sent via e-mail to the Labor Department at E-OHPSCA.EBSA@dolgov.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Chrysler hourly employees will receive unemployment benefits as well as supplemental pay that will amount to most of their base wages until the company emerges from the bankruptcy protection it filed Thursday, April 30, the company said.

Chrysler CEO Robert Nardelli made the announcement in a memo sent to employees shortly after the company filed for bankruptcy protection Thursday. The company assured workers that the structured, U.S. Treasury directed, bankruptcy is anticipated to last 30 to 60 days. The bankruptcy will produce a new company that will be part of Italian automaker Fiat, which agreed to a strategic alliance Thursday, April 30.

During that time, most manufacturing will be idled effective Monday, May 4. Union employees will still receive company-sponsored health care. Nardelli said “all qualified employee” pension and 401(k) funds would be protected from Chrysler’s creditors.

Based on agreements ratified before the bankruptcy filing, the United Auto Workers agreed to labor concessions in return for giving the union’s retiree health care trust a 55 percent equity stake in the newly formed automaker. The UAW represents about 26,800 Chrysler workers in the United States.

Fiat will own 20 percent and the U.S. and Canadian governments will own 10 percent, according to a company press release.

The bankruptcy will do little for the company’s network of 3,200 dealerships, many of which are likely to close as a result of the bankruptcy.

Nardelli also told employees that he would step down as chief executive after the company emerged from bankruptcy to become an advisor to Cerberus Capital Management, the private equity firm that bought a controlling stake in the car maker in 2007 and later relinquished ownership as part of the government’s bailout.

“With the U.S. government approval of our viability plan and the completion of an agreement in principle for the alliance, this is an appropriate time to let others take the lead in transformation of Chrysler with Fiat,” Nardelli said.

Chrysler has shed almost 40 percent of its workforce over the past two years, to 54,000 workers as of January 1 from nearly 87,000. The company expects to trim 3,000 more workers by the end of the year, a spokesman said.

—Jeremy Smerd

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Chrysler CEO Bob Nardelli says he will step aside after the company emerges from Chapter 11 bankruptcy.

“Now is an appropriate time to let others take the lead in the transformation of Chrysler with Fiat,” Nardelli said in a statement. “I will work closely with all of our stakeholders to see that this new company swiftly emerges with a successful closing of the alliance.”

The White House expects the bankruptcy case to take 30 to 60 days.

Nardelli came to Chrysler in August 2007 after Cerberus Capital Management took an 80.1 percent stake in the automaker. He has guided the company through negotiations with the United Auto Workers and the Department of Treasury auto task force. Chrysler has been surviving on a $4 billion Treasury loan.

Nardelli, who turns 61 on May 17, represented the company in congressional hearings late last year. He plans to return to Cerberus as an adviser. Before heading Chrysler, Nardelli spent six controversial years as CEO of Home Depot, finally receiving a $210 million severance package when he left the retail giant in January 2007.

David Kelleher, a Philadelphia Chrysler-Dodge-Jeep dealer, praised Nardelli and Chrysler’s management team.

“If people on top of the board hadn’t done the job they did in the last six months, we wouldn’t have a company,” Kelleher said.

A senior administration official praised “the incredible role of Chrysler management and CEO Bob Nardelli. He led the team to this place and really deserves recognition for what he did.”

Filed by Bradford Wernle of Automotive News, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Vice President Joe Biden got to know Sen. Arlen Specter pretty well on many Amtrak train rides they shared while commuting from Washington to their homes in Delaware and Pennsylvania, respectively, when Biden was in the Senate.

Now that Specter has joined Biden in the Democratic Party, he doesn’t expect the former Republican to change his opposition to a bill that would make it easier for workers to organize. Specter reiterated that stance in announcing his party switch on Tuesday, April 28.

“Arlen is a close friend but a very independent guy,” Biden told reporters in a conference call Wednesday, April 29. “I take Arlen at his word.”

Biden anticipated that Specter would entertain supporting a modified bill. “Arlen will have an open mind if a compromise is offered,” he said. “He’ll listen to alternatives.”

Specter came out against the Employee Free Choice Act in March, saying that he opposed two key provisions.

One would allow a union to form when a majority of workers sign cards authorizing one. Another would impose binding arbitration if employers and a union didn’t reach a first contract within 120 days.

But Specter also asserted that labor laws are not working properly. He proposed amending the National Labor Relations Act.

Specter’s decision to change parties reduces the number of Republicans in the Senate to 40, which is one short of the number they need to block legislation through a filibuster. That maneuver was used in a previous Congress to kill EFCA.

After more than four decades as a Republican, Specter said that he did not want to run in the 2010 Pennsylvania Republican primary. His vote in favor of the $787 billion stimulus bill earlier this year has “caused a schism” that has made differences with the party “irreconcilable,” he said in a statement.

But Specter vowed to maintain his independence. “My change in party affiliation does not mean that I will be a party-line voter any more for the Democrats than I was for the Republicans,” he said in a statement. “I will not be an automatic 60th vote for cloture. For example, my position on Employees Free Choice [card check] will not change.”

Biden said that the White House supports EFCA, which is the top legislative priority for unions.

“We’ve been listening to organized labor as well as business on their mutual concerns about [the bill],” Biden said.

Biden asserted that current labor laws, which allow companies to demand a secret-ballot election, create obstacles for workers to form unions.

“That’s been made such a tricky wicket for labor to go through,” Biden said. “I am hopeful we will get card check passed.”

The business lobby opposes the bill because it says the measure will effectively end the right to a secret ballot for union elections and raise labor costs for corporations.

Supporters of the legislation maintain that the bill does not remove the secret ballot; it simply gives workers a choice of which process—ballot or card check—to use. They also say that strengthening unions will give employees leverage to raise wages and benefits. About 7.6 percent of workers in the private sector are unionized.

Glenn Spencer, executive director of the Workforce Freedom Initiative at the U.S. Chamber of Commerce, said EFCA faces an uphill battle even after Specter’s defection to the Democrats.

He noted that Sen. Blanche Lincoln, D-Arkansas, opposes the bill. Other moderate Democrats also have raised concerns and refused to co-sponsor the measure.

“In reality, they’re at least two votes short of the 60 they need,” Spencer said. “I don’t know that Specter changing the letter behind his name significantly changes the calculus on this issue.”

Mike Aitken, director of government affairs at the Society for Human Resource Management, said that Specter’s move will heighten interest in his proposal for a compromise. But it won’t ensure EFCA approval.

“It’s got to get more than just Specter to be viable,” Aitken said.

But Josh Goldstein, spokesman for American Rights at Work, said that Specter’s move gave EFCA momentum.

“It’s a new day for the Employee Free Choice Act,” he said. “We’ll continue to work with Sen. Specter on finding ways to create real labor law reform this year.”

Providing employees a “fair and direct path” to unionization, imposing “real penalties” on employers for labor law violations and ensuring a first contract in a reasonable amount of time are reform principles that won’t be diluted, Goldstein said.

“We need to let the legislative process on the Employee Free Choice Act play out … before we can get to counting [vote] numbers,” Goldstein said.

—Mark Schoeff Jr.

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Greenhouse gas cap-and-trade legislation such as that proposed by the Obama administration and under discussion in the House could result in the loss of more than 3 million jobs by 2030, according to a recently released report.

In addition, the legislation could cost the average household $2,100 annually, according to the report compiled on behalf of the Coalition for Affordable American Energy, which receives funding from more than 180 business groups.

“This study proves that the pending bill will be a massive weight on an economy that is barely treading water,” said Bruce Josten, executive vice president of government affairs at the U.S. Chamber of Commerce. “All consumers and businesses would face steep increases in energy costs, leading to a spike in the cost of goods and services throughout the U.S. economy.”

The study concludes that by 2030, natural gas and electricity costs will increase by more than 50 percent and motor fuels costs by 78 cents a gallon. Taken together, the combined effects of increased energy costs and dollars spent on carbon reductions will force industry to reduce productivity.

The findings are in contrast to a recent EPA estimate that climate legislation could cost each household $98 to $140 per year.

Waste & Recycling News

Filed by Bruce Gieselman of Waste & Recycling News , a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Here are answers from the federal agency to some questions about the illness.

What are the symptoms of swine flu in humans?
The symptoms of swine flu in people are expected to be similar to the symptoms of regular human seasonal influenza and include fever, lethargy, lack of appetite and coughing. Some people with swine flu also have reported runny nose, sore throat, nausea, vomiting and diarrhea.

What medications are available to treat swine flu infections in humans?
There are four different anti-viral drugs that are licensed for use in the U.S. for the treatment of influenza: amantadine, rimantadine, oseltamivir and zanamivir. While most swine influenza viruses have been susceptible to all four drugs, the most recent swine influenza viruses isolated from humans are resistant to amantadine and rimantadine. At this time, the CDC recommends the use of oseltamivir or zanamivir for the treatment and/or prevention of infection with swine influenza viruses.

Is there a vaccine for swine flu?
Vaccines are available to be given to pigs to prevent swine influenza. There is no vaccine to protect humans from swine flu. The seasonal influenza vaccine will likely help provide partial protection against swine H3N2, but not swine H1N1 viruses.

Over the years, different variations of swine flu viruses have emerged. At this time, there are four main influenza type A virus subtypes that have been isolated in pigs: H1N1, H1N2, H3N2 and H3N1. However, most of the recently isolated influenza viruses from pigs have been H1N1 viruses.

What are everyday actions people can take to stay healthy?

• Cover your nose and mouth with a tissue when you cough or sneeze. Throw the tissue in the trash after you use it.
  
• Wash your hands often with soap and water, especially after you cough or sneeze. Alcohol-based hands cleaners are also effective.
  
• Avoid touching your eyes, nose or mouth. Germs spread that way.
  
• Try to avoid close contact with sick people. Influenza is thought to spread mainly person-to-person through coughing or sneezing of infected people.
  
• If you get sick, the CDC recommends that you stay home from work or school and limit contact with others to keep from infecting them.

What about anti-viral drugs?
Anti-viral drugs are prescription medicines (pills, liquid or an inhaler) with activity against influenza viruses, including swine influenza viruses. Anti-viral drugs can be used to treat swine flu or to prevent infection with swine flu viruses. These medications must be prescribed by a health care professional. Influenza anti-viral drugs only work against influenza viruses; they will not help treat or prevent symptoms caused by infection from other viruses that can cause symptoms similar to the flu. There are four influenza anti-viral drugs approved for use in the United States (oseltamivir, zanamivir, amantadine and rimantadine). The swine influenza A (H1N1) viruses that have been detected in humans in the U.S. and Mexico are resistant to amantadine and rimantadine so these drugs will not work against these swine influenza viruses. Laboratory testing on these swine influenza A (H1N1) viruses so far indicate that they are susceptible (sensitive) to oseltamivir and zanamivir.

What are the benefits of anti-viral drugs?
Treatment: If you get sick, anti-viral drugs can make your illness milder and make you feel better faster. They may also prevent serious influenza complications. For treatment, anti-viral drugs work best if started as soon after getting sick as possible, and might not work if started more than 48 hours after illness starts.

Prevention: Influenza anti-viral drugs also can be used to prevent influenza when they are given to a person who is not ill, but who has been or may be near a person with swine influenza. When used to prevent the flu, anti-viral drugs are about 70 to 90 percent effective. When used for prevention, the number of days that they should be used will vary depending on a person’s particular situation.

The CDC recommends the use of oseltamivir or zanamivir for the treatment and/or prevention of infection with swine influenza viruses.

• Oseltamivir (brand name Tamiflu) is approved to both treat and prevent influenza A and B virus infection in people one year of age and older.
• Zanamivir (brand name Relenza) is approved to treat influenza A and B virus infection in people 7 years and older and to prevent influenza A and B virus infection in people 5 years and older.

Recommendations for using anti-viral drugs for treatment or prevention of swine influenza will change as we learn more about this new virus. Clinicians should consider treating any person with confirmed or suspected swine influenza with an anti-viral drug. Visit http://www.cdc.gov/swineflu/recommendations.htm for specific recommendations.