Author: Site Staff

Chrysler LLC will offer buyouts next week to more than 2,400 workers at an Illinois assembly plant as the money-losing automaker boosts efforts to trim its workforce.

The Belvidere plant will become the 20th Chrysler factory to receive offers since September, spokesman Ed Saenz said.

The cutbacks are part of a restructuring program announced in November 2007. Chrysler’s U.S. sales have fallen every month since then, and owner Cerberus Capital Management is exploring a possible sale to buyers, including General Motors. (For more, read “Chrysler Chief Warns of Industry Collapse.”)

The Belvidere package comes in addition to buyout proposals delivered Wednesday, November 5, to more than 18,000 white-collar employees in the U.S. The workers have until November 26 to accept them. If Chrysler fails to meet its goal of cutting 25 percent of its salaried workforce, it will begin involuntary layoffs, said Chrysler spokesman David Elshoff.

The white-collar buyouts include a $25,000 voucher to buy a new car. The voucher applies only to vehicles invoiced to dealers before July 1. Chrysler employees can use the voucher to buy cars they now lease.

Buyout offers also will go to 938 white-collar workers in Canada, 1,250 in Mexico and 470 in the rest of the world, Elshoff said.

Saenz said Chrysler would continue work on two shifts at Belvidere. A third shift was eliminated this year. The plant makes the Dodge Caliber car and the Jeep Compass and Patriot crossovers, three of the most fuel-efficient vehicles in the automaker’s fleet. (For more, read “UAW Chief: Detroit Three Quiet on Helping Retiree Funds.”)

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

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If economic conditions don’t improve soon, it appears that the majority of companies are set to begin implementing hiring freezes or laying off their workers.

About three-quarters of human resources executives polled at several hundred companies said budget cuts across their entire organizations are likely.

According to the poll, released Monday, November 10, by the Society for Human Resource Management, 55 percent of these HR professionals said that it was probable that they would put a freeze on hiring efforts. Layoffs are another likely course of action if the economy doesn’t begin to pick up soon, close to 40 percent of the executives also said.

Roughly half of the respondents indicated that wage freezes and bonuses cuts were other likely responses to the downturn.

Job losses have already begun to mount, with employers slashing more than 240,000 positions last month, according to the latest payroll numbers from the Department of Labor. The DOL revealed these figures Friday, along with revised job losses for September and August.

The unemployment rate spiked to 6.5 percent in October—its highest level since March 1994.

That percentage is likely to go much higher. On Monday, Deutsche Post said it would eliminate 9,500 jobs in its U.S.-based express delivery service, DHL, by early next year.

Likewise, Nortel Networks, which recorded its biggest quarterly loss in seven years in the third quarter, said it would lay off more than 1,300 workers. And executives at Rockwell Collins disclosed Monday that the aerospace components company will trim its workforce by 1.5 percent, or 300 employees. Rockwell Collins will also delay merit increases for its management team and the majority of its workers, and defer or eliminate some open positions at the company.

Filed by Mark Bruno of Financial Week, a sister publication of Workforce Week. To comment, e-mail editors@workforce

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As HR managers know, the Equal Employment Opportunity Commission is the federal agency charged with enforcing compliance with employment discrimination laws. What may not be as familiar are exactly the names and details of the laws that the EEOC covers. They are:

• Title VII of the Civil Rights Act
• Equal Pay Act of 1963
• Age Discrimination in Employment Act of 1967
• Rehabilitation Act of 1973, Sections 501 and 505
• Titles I and V of the Americans with Disabilities Act of 1990
• Civil Rights Act of 1991

The EEOC’s Web site offers an in-depth look into each of the six laws on the page titled “Laws Enforced by the EEOC.” HR managers and other executives may find it useful to bookmark the page for quick access to these important rules.

Workforce Management Online, November 2008 — Register Now!

Though business litigation has declined in recent years, corporate lawyers predict that the frequency of suits may increase in 2009, according to a new survey of corporate attorneys by international law firm Fulbright & Jaworski.

The projected increase is likely to come from both a rising trend of wage and hour litigation and a change in federal law that makes it possible for employees to file disability-related lawsuits even if their disabilities are correctable through medication or assistive technology.

The study also found that although litigation is down, nearly four out of five companies reported being hit with a suit in the past year, and one out of five organizations face 20 or more of them. Additionally, the overall cost from lawsuits seems to be holding steady, with 45 percent of companies reporting that they are spending at least $1 million on litigation costs annually, a slight uptick from a year ago.

“With a new definition of who is disabled under the [Americans with Disabilities Act], we expect to see a significant increase in claims over the next year and a half,” said Butch Hayes, an Austin, Texas-based partner in Fulbright & Jaworski’s employment and labor practice.

Additionally, Hayes said that wage and hour-related litigation under the federal Fair Labor Standards Act has tripled in the past decade, and that trend shows no signs of abating.

“I think [plaintiff] lawyers are becoming more educated about what the laws allow and don’t allow,” he said. “Some lawyers now take wage and hour claims almost exclusively.”

Fulbright & Jaworski’s study had 358 participants globally, including 251 U.S. companies and 100 from the U.K. Forty-eight percent of the companies are publicly held, and 40 percent have annual revenue of $1 billion or more. (All of the findings cited in this story are for U.S. companies only.)

Pending employment-related lawsuits were cited by 47 percent of companies in 2008, making them slightly more common than contract disputes, in which 46 percent of companies were embroiled. An additional 29 percent faced personal injury lawsuits.

Overall litigation costs for U.S. companies basically remained stable in 2008, though the decrease in the frequency of lawsuits suggests that they are costing more. Thirty-nine percent of U.S. companies spent $500,000 or less on litigation, while 15 percent spent between $500,000 and $1 million, 29 percent spent between $1 million and $5 million, 7 percent spent between $5 million and $10 million, and 9 percent spent $10 million or more.

U.S. companies mostly gave themselves high marks for their management of records, which often becomes a crucial issue in employment lawsuits. Sixty percent of companies gave themselves a rating of 4 or 5 on a confidence scale, with 5 being the highest score in that area. Twenty-two percent rated themselves as fair, and 17 percent gave themselves a 1 or 2 rating, indicating a lack of confidence in their performance.

—Patrick J. Kiger

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Corporations are expected to impress upon President-elect Barack Obama and Congress that the woes they are experiencing over their ailing pensions must be addressed even before the Democrats take over the White House in January.

Pension funding rules are estimated to cost companies more than $100 billion next year—hardly small change in any year, let alone one that could see a severe recession—and could force corporations to eventually freeze or terminate their defined-benefit pension plans.

But getting Obama and lawmakers to pay attention to pension funding could prove to be a major challenge. So lobbyists are preparing to make a broader case for relaxing the rules.

“It’s not just a pension issue,” said Lynn Dudley, senior vice president of policy at the American Benefits Council, an employer advocacy group in Washington that’s lobbying on behalf of hundreds of corporations for some temporary relief from pension funding rules. “It’s a major economic issue that needs to be recognized immediately.”

By the time Obama assumes office in January, scores of corporations will likely be burdened with significantly underfunded pension plans. And, just as major losses in the equity markets sucked assets out of pension plans during the past 10 months, relatively new pension rules have the potential to drain billions from corporations’ coffers next year.

A new study released by the Boston College Center for Retirement Research earlier this month suggested that employers could be on the hook for up to $150 billion in pension contributions in 2009—triple the $50 billion in contributions companies will make this year.

“Companies have already been forced to tap into their cash this year for basic business purposes, like making payroll,” noted Judy Schub, managing director for the Committee on Investment of Employee Benefit Assets, which represents more than 100 corporate plan sponsors. “With eroding cash positions, and very little access to credit, companies will be forced to fund their pensions by cutting their operations and workforces—and that clearly was not the intention of these new funding requirements.”

The new funding rules, which were included in the Pension Protection Act of 2006 and went into effect this year, require companies with underfunded plans to make larger, more aggressive contributions to quickly get their pensions 100 percent funded (the previous target was only 90 percent). There was also a provision to force companies to freeze their pension plans if funding levels fall below 60 percent.

“That’s the double whammy,” Dudley said. “At the same time people could be losing their jobs because their companies are forced to make cutbacks, workers’ retirements could be compromised too.”

The cost of contributions to corporations is expected to resonate with Obama and Congress, but it is the threat to workers’ retirement security that could ultimately lead the new administration to take action and ease the new pension requirements.

“If we don’t do something soon, we could be ringing the death knell on the remaining presence of defined-benefit plans,” said Rep. Earl Pomeroy, D-North Dakota.

Obama has been described as “pro-defined benefit” by several pension observers, who noted that while addressing pension issues may not be the president-elect’s first order of business, it’s certainly on his radar screen. And Pomeroy, a member of the House Ways and Means Committee, noted he is “flat-out confident” that some form of pension relief will be provided to corporations, maybe even before Obama is sworn into office.

“With the economy in crisis, pension funding has been overlooked,” Pomeroy acknowledged. “But we’re now starting to see a clear, bipartisan consensus develop that this is an issue that could have severe consequences on corporations and their employees if it isn’t addressed.”

Obama and his administration are expected to be particularly sensitive to retirement issues in light of the recent damage that has been done to workers’ 401(k) savings. Forced freezes of pension plans would only serve to further threaten the retirement security of workers, something Obama’s chief of staff, Rep. Rahm Emanuel of Illinois, has been vocal about in the past. Emanuel advocated securing airline industry workers’ retirement plans in 2004 when United Airlines and US Airways were in the middle of bankruptcy proceedings.

The dramatic declines in equities this year have also underscored just how vulnerable participants in defined-contribution plans are to wild swings in the stock market, and may prompt Obama and Congress to encourage the use of more defined-benefit plans, said Donald Myers, partner in the financial industry group at law firm Reed Smith.

“It would be going in the opposite direction that companies have been heading with traditional pension over the last several years,” Myers said. “But the concept of a guaranteed pension system has never looked better than it does right now.”

That, however, is an issue that Obama and Congress may wait to address.

For now, employer advocates such as the American Benefits Council, Financial Executives International and the U.S. Chamber of Commerce are not waiting for Obama to assume his new post. More than a dozen advocates have already begun lobbying lawmakers for technical corrections to the PPA that could provide some short-term relief for corporations that must make major contributions next year.

Ideally, these corrections—which would slow the transition period to PPA requirements and would let plan sponsors smooth out pension losses beyond 2009—would be included in a new stimulus package before Congress ends its current session, said Cady North, manager of government affairs at Financial Executives International in Washington. Pomeroy concurred, and noted that it would be “strongly preferable” to push some relief through this year.

“We’re not asking to repeal PPA, and we’re not asking Treasury for any money,” said North, whose organization represents 15,000 financial officers. “We’re asking for some temporary relief. And it’s a very time-sensitive request that needs to be addressed now, because corporations need to budget for next year.”

And those contributions appear as if they could be significantly more than many companies were figuring earlier this year. Consulting firm Watson Wyatt gathered data from 28 corporate clients, who estimate that their aggregate required pension contributions will be $2.1 billion—181 percent higher than those companies had previously budgeted.

“You can make a reasonable argument that these kinds of unexpected increases couldn’t come at a worse time for corporations,” said R. Evan Inglis, chief actuary at Vanguard. “But it’s also coming at a time when there are so many other critical issues the government needs to address that it certainly isn’t at the top of anyone’s list in Washington right now.”

Filed by Mark Bruno of Financial Week, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

Dow Jones & Co. is closing its Naperville, Illinois, facility as the publishing company consolidates its printing needs for The Wall Street Journal throughout the nation.

Fifty employees will lose their jobs as a result of the closing, a Dow Jones spokesman said. The company is in negotiations with Teamsters Local 706, which represents its Naperville employees, on a closing date.

The Naperville office prints and distributes The Wall Street Journal for metro Chicago.

That work is being transferred over to Tribune Co.’s printing plant at Chicago Avenue and Halsted Street, the spokesman said.

Dow Jones, parent of the Journal, has been closing some of its printing facilities and outsourcing its printing needs. It has an agreement with the Denver Newspaper Agency to handle printing of the Journal in that area.

Filed by Crain’s Chicago Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Caretakers of the United Auto Workers’ health care trust are concerned that the slumping fortunes of Detroit’s Big Three automakers could leave retirees without health care benefits.

“Obviously, we’re as worried as” the public is, says Teresa Ghilarducci, a member of the 11-person board overseeing the UAW-run health care trust and a professor of economic policy analysis at the New School for Social Research in New York.

She said that given the deteriorating financial state of the industry, the health care trust may not last as long as the 80 years UAW leaders first projected.

Ford and General Motors announced further heavy financial losses Friday, November 7. Ford revealed a pretax operating loss of $2.98 billion for the third quarter. GM reported $2.5 billion in third-quarter losses and said in a statement that its “estimated liquidity during the remainder of 2008 will approach the minimum amount necessary to operate its business.”

“Immediate federal funding is needed for the U.S. automotive industry to weather this downturn,” GM president Fritz Henderson said in a conference call with investors.

Chrysler, which is privately run by private equity firm Cerberus Capital Management, does not publicly disclose its finances. The company was in talks with GM regarding a possible merger, but GM said Friday that it would not pursue a merger with Chrysler in the short term.

A union-run health care trust known as a voluntary employee benefit association, or VEBA, was supposed to help the automakers escape bankruptcy by capping the amount they would pay for retiree health care expenses. For the retirees, the VEBA was described as insurance against losing retiree health care benefits should the automakers file for bankruptcy. The money would be available for retiree health care regardless of how the automakers fared.

But in July, GM deferred paying $1.7 billion into the VEBA, angering GM retirees.

“What we were promised in the last contract in 2007 in exchange for very deep concessions was that our health care would be guaranteed in the event of bankruptcy,” says Gregg Shotwell, 58, a former GM plant worker and union member who retired last month. “That was a lie. Because no money actually changed hands. Here we are today on the verge of bankruptcy and the VEBA is not funded. I’ve already been at the back of the line with [former GM subsidiary] Delphi. I don’t want to be at the back of the line in my retirement.”

The UAW is scheduled to take over responsibility for providing health benefits to more than 700,000 members and dependents January 1, 2010. Union president Ron Gettelfinger rallied UAW members to support the VEBA in 2007 by saying it would secure retiree health care benefits for the next 80 years. Ghilarducci says that given the current state of the industry, there is a “low probability” that the fund will last that long. Current retirees’ health care benefits were not in doubt, however.

“I’m convinced that current retirees won’t lose a penny,” she said. “If there are tradeoffs, we’ll trade the future generations for the current generation.”

The total value of the health care trust is to be about $60 billion, with GM providing around $33 billion, Ford roughly $15 billion and Chrysler about $9 billion. Each company will fund and manage the VEBA separately until 2010, after which the UAW will keep the funds for each company’s retirees separate.

Part of the VEBA is to be funded by the deferral of a 3 percent wage increase for current UAW workers. Layoffs of union workers, however, could reduce the amount paid into the VEBA, though the agreement with the UAW had some provisions in place to safeguard against the possibility of layoffs.

Meanwhile, the UAW-run VEBA has been seeded several million dollars to begin operations. The union is looking for a chief investment officer and a person to manage retiree health benefits.

The industry’s fortunes have fallen rapidly. In April 1990, GM’s stock traded above $90 per share. Today, GM shares are worth less than $5. The credit crisis, weak consumer demand and high fuel costs have propelled the industry to the brink of insolvency and Washington to seek a federal bailout.

“If we get the money [for the VEBA], we’ll be OK,” Ghilarducci says. “If the companies go bankrupt, then we’ll stand in line with all the other creditors.”

—Jeremy Smerd

The FBI is investigating an extortion threat involving patient prescription records maintained by pharmacy benefit manager Express Scripts Inc., the company announced Thursday, November 6.

The extortionist is threatening to expose millions of records and sent
the company a letter that included the names, dates of birth, Social
Security numbers and some prescription information for 75 members, St. Louis-based Express Scripts said.

Apart from notifying the FBI, the company said it was also conducting its own investigation with the help of outside data security and forensics experts.

Express Scripts also launched a Web site for members to obtain
information on protecting themselves at www.esisupports.com.

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

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In coming weeks, a number of Fortune 500 companies are planning to cut merit raises and conduct further layoffs as they continue to wrestle with the economic downturn, according to recent polls conducted by the Corporate Executive Board.

As of mid-October, 30 percent of the 100 compensation and benefits executives polled said they were planning to reduce their 2009 merit budgets, while 45 percent weren’t sure yet, according to a poll conducted by the Corporate Executive Board, a Washington-based organization that provides best practices information and support to member companies.

“Based on conversations since that poll was conducted, it would seem that more companies have decided to reduce their merit budgets or get rid of merit raises altogether,” said Michal Kislevitz, managing director at the Corporate Executive Board. “Things are changing quickly.”

In a smaller poll of 50 executives attending a Corporate Executive Board teleconference on severance payments, more than 50 percent indicated they also were planning layoffs that they had not yet announced. Thirteen percent had already announced layoffs, while 25 percent were undecided.

“It tends to look like everyone is cutting about 10 percent of their workforce,” Kislevitz said of the respondents.

It does seem, however, that companies are being strategic about how they reduce their workforces, Kislevitz said. Seventy-four percent of companies in a poll of 45 executives said they were paying involuntary severance packages rather than voluntary ones. This may indicate that companies are making a greater effort to weed out low performers rather than just offer buyouts and see who takes them, Kislevitz said.

“I think what’s going on is that these organizations are being more thoughtful about who they are cutting,” Kislevitz said.

—Jessica Marquez

The premiums that employers with defined-benefit plans pay the Pension Benefit Guaranty Corp. will increase slightly next year.

The base premium—now $33 a year per plan participant—will increase to $34. That increase is a result of a federal law that requires that the premium be adjusted to reflect changes in the national average weekly wage during the prior year.

In fiscal 2007, the last year for which information is available, the PBGC collected about $1.1 billion in base premiums in its single-employer insurance program; $358 million in variable-rate premiums, which are paid by employers with underfunded plans; and $61 million in termination premiums. Termination premiums are imposed on employers that terminate an underfunded plan as part of the bankruptcy process. A $1,250-per-participant premium is due in each of the three years after emergence from Chapter 11 protection.

The premiums collected by the PBGC are used to help pay benefits to participants in plans taken over by the PBGC, which in 2007 had a $13.1 billion deficit in its single-employer insurance program.

Separately, the PBGC announced an increase in the maximum annual benefit it will guarantee to participants who retire at 65 and are in underfunded plans that the agency takes over. The cap in 2009 will be $54,000, up from $51,700 for plans that terminated in 2008.

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

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