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The Obama administration took General Motors into Chapter 11 bankruptcy Monday, June 1, and moved quickly get the carmaker out with $30.1 billion in bankruptcy financing, the White House said in a statement.

The federal government will have the right to replace GM’s current board of directors with its own trustees, except for one director who will be picked by the Canadian government and another selected by a United Auto Workers-administered retiree health care trust.

But the White House vowed to exercise its ownership stake in GM “in a hands-off, commercial manner.” That is, to let it operate as a car company, not a government agency.

The Obama administration said it didn’t intend to provide funding beyond the $30.1 billion in bankruptcy financing. The government has already assisted GM with $19.4 billion since late December.

The $30 billion will give the government a 60 percent stake in a reorganized GM. The governments of Ontario and Canada will provide another $9.5 billion in financing to GM for a 12 percent stake in the new GM.

Dealerships that GM plans to discontinue will be offered an agreement to phase out their stores over the next 18 months.

More pain is in store for the UAW members as well.

GM intends to announce that it will close 11 plants and idle three others. The carmaker had aimed in February to cut 21,000 more hourly workers. GM employs about 54,000 workers represented by the UAW.

With the necessary reductions in capacity and a cleaned-up balanced sheet, a reorganized GM will be able to break even on its operations at 10 million annually in industrywide U.S. vehicle sales, the administration said. The previous break-even point was 16 million sales, according to the White House.

Contract concessions approved by the UAW last week will save GM about $1.2 billion annually. That agreement calls for elimination of bonuses and cost-of-living increases as well as more flexible factory rules.

The UAW also agreed to accept GM equity instead of cash for most of the funding of the retiree health care trust known as a voluntary employee beneficiary association.

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

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Minutes after General Motors filed for bankruptcy protection, CEO Fritz Henderson in a 45-minute videoconference attempted to raise the spirits of a beleaguered workforce even as he announced the company would lay off an additional 4,000 salaried employees, most by year’s end.

On Monday, June 1, Henderson spoke of the “new GM” that would emerge from bankruptcy with more competitive labor contracts, reduced operating costs, fewer plants and a leaner production capacity focused on small, fuel-efficient cars.

Henderson later spoke during a news conference, evoking a sober optimism and saying that the bankruptcy was a “defining moment” for the 101-year-old automaker.

“The new GM will have a significantly healthier balance sheet,” he said.

He spoke of the salaried and hourly workforce reductions and plant closures as “extraordinarily difficult steps.”

Henderson said he expected the bankruptcy to be completed within 90 days.

By 2010, GM said it expects to have a salaried workforce of 23,000 in the U.S., down from the 29,000 salaried workers GM had at the end of 2008.

Hourly U.S. workers will drop to 40,000 in 2010 and 38,000 by 2011. GM says it will close 14 plants by 2010. GM had 61,000 hourly workers at the end of 2008.

In a note to employees, the company said, “General Motors is working with the U.S. Treasury to reduce some retiree benefit obligations by roughly two-thirds. This reduction will impact salaried retiree life insurance, salaried retiree health care, executive non-qualified pension, executive retiree life insurance and non-UAW hourly life insurance and we are still working on how to accomplish this in the most appropriate way.”

The company said it will reduce the number of dealers to 3,600 by 2010 from the 5,969 it counted at the end of 2008.

“We need to move fast. Speed is of the essence,” Henderson said during the news conference. “Not with a sense of urgency. I’m talking about pure, unadulterated speed.”

As GM attempts to rebuild, its workers describe an atmosphere resembling the TV show Survivor.

“It’s dog eat dog,” said one GM worker on Monday who asked for anonymity because workers are not allowed to speak to the media. “You have to watch your back. People who were friends are no longer.”

Employees describe an atmosphere of low morale and anxiety that has been heightened by a deterioration in work conditions. Salaried workers describe lawns that have not been mowed in weeks and bathrooms not adequately stocked with toilet paper or soap.

A spokesman said the deterioration is to be expected at a time of extreme austerity for the company.

For employees who once referred to their employer affectionately as “Generous Motors,” the swift change has been upsetting. A kind of shock, mixed with gallows humor, has set in, workers say.

Employees say GM stands for “Government Motors” now that the Treasury Department is the major stakeholder, followed by the unions and union’s retiree health care trust.

The bankruptcy filing of General Motors represents a new chapter for the storied American carmaker, and Henderson, in his talk with employees, tried to convey a sense of renewal by focusing on the distinction between the “old GM” and the “new GM” that would emerge from bankruptcy to reclaim its position of prominence in the global auto industry as a leader in 21st century green technology.

Workers, however, have already begun to refer to his talk as “the eulogy.”

—Jeremy Smerd

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P&I  May 26  Doug Halonen

The Pension Benefit Guaranty Corp. has taken over the defined-benefit pension plan of Contech US of Portage, Michigan, according to a PBGC news release.

The Contech plan, which covers 532 workers and retirees, is 38 percent funded, with assets of $8.4 million and liabilities of $22 million, the news release said. The PBGC expects to cover $12 million of the $13.6 million shortfall.

The plan was frozen on December 31, 2007, according to the release.

Contech, which is under Chapter 11 bankruptcy protection, is selling its divisions and subsidiaries to several third parties in deals that do not include the pension plan, the news release said.

Filed by Doug Halonen of Pensions & Investments, a sister publication of Workforce Management To comment, e-mail editors@workforce.com.

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Because of the economy and related problems, stress levels are no doubt higher among workers this summer. Employers can help their people deal with some of their anxiety with information and strategies from the National Headache Foundation, the Wellness Councils of America says. It’s National Headache Awareness Week on June 7-13, but the month also is significant for other observances, including Home Safety Month, Vision Research Month and National Cancer Survivors Day (June 7).

You need a scorecard to keep up with President Barack Obama’s plethora of priorities. On the domestic policy side, he has vowed to make sweeping changes in health care, energy and education.

An important subset of education–workforce training–tends to fly under the radar in Washington, but it will require more presidential and congressional leadership than it has received in a long time.

Obama appears set to provide guidance. On May 8, he announced that the Departments of Labor and Education would work with states and educational institutions to allow recently laid off workers to receive unemployment payments while they are enrolled in training programs and to have easier access to educational grants.

“The idea here is to fundamentally change our approach to unemployment in this country, so that it’s no longer just a time to look for a new job, but is also a time to prepare yourself for a better job,” Obama said.

Now Obama will have to follow through in an area that has languished from neglect in Washington.

The federal law that undergirds training programs, the Workforce Investment Act, has been up for renewal for nearly six years but has been stymied by a variety of policy and political issues. Congress is under way with another attempt.

Most experts and users of the system agree that it needs to be more flexible to respond to local labor market needs. Too many programs are run in silos and fail to communicate with one another.

Determining what kind of training is offered for what kind of jobs is a huge question that can elicit many different answers. The Obama administration wants to focus on so-called “green jobs.” The $787 billion stimulus package included $500 million for training in that area.

Republicans caution that federal training should be improved for all kinds of occupations and worry about artificial demand being created by government fiat.

Democrats also question whether job training priorities have been set correctly. Rep. David Obey, D-Wisconsin and chairman of the House Appropriations Committee, expressed concern at a May 12 hearing on the Department of Labor budget.

He noted that the stimulus bill included $250 million for training for health care industry jobs. But the administration’s budget request for the agency didn’t contain similar funding.

“If we’re serious about significant health care reform, we need to build the capacity of the system, and we’re falling short in this area,” Obey told Labor Secretary Hilda Solis.

The thousands of jobs that Dollar General Corp. will have to fill over the next couple years aren’t necessarily “green.” But they could offer a path out of the recession for thousands of workers–if they are qualified.

As Dollar General Stores become more automated in tracking and managing inventory, employees have to be more fluent with technology, according to David Bere, president and chief strategy officer.

They don’t have to have bachelor’s degrees, but they should have training beyond high school. “You need a higher skill set in our stores and distribution centers,” Bere said in an interview after a recent House hearing on the Workforce Investment Act.

Dollar General has long been an advocate of federal training programs. Bere urges other companies to join in the effort to reshape the system. 

“The business community has to step up,” Bere said. “Only by partnership is this going to get done.”

When it comes to job training, many constituencies want to see improvement. But it will take firm leadership from Obama and Congress to make sure that they work together to set priorities that make sense for workers and the economy.

Members of the United Auto Workers have ratified an agreement that will allow financially troubled General Motors Corp. to shave billions of dollars in contributions to a retiree health care trust and cut certain retiree benefits, union officials announced Friday, May 29.

The agreement, approved by nearly 75 percent of UAW members, also requires GM to continue its defined benefit pension plan offered to UAW members.

The agreement on the eve of GM’s expected bankruptcy filing next week modifies a 2007 accord between GM and the UAW that would have capped GM’s burgeoning retiree health care liabilities. That agreement called for GM to transfer assets—currently valued at $10 billion—from an existing voluntary employees’ beneficiary association to a new VEBA controlled by the UAW. For about $20 billion in cash and other contributions to the trust, GM no longer would have been responsible for retiree health care benefits as of Jan. 1, 2010. The accumulated value of those assets was estimated at roughly $50 billion last year.

The new agreement maintains that VEBA-to-VEBA transfer arrangement. However, instead of GM contributing about $20 billion in cash and other contributions, the new VEBA will receive a note, payable in cash, with a principal amount of $2.5 billion. The note will make cash payments of $1.38 billion, including accrued interest, in 2013, 2015 and 2017.

The VEBA also will receive preferred stock in the restructured company with a face value of $6.5 billion. The stock will pay an annual cash dividend of $585 million for as long as the VEBA holds the stock.

Finally, the VEBA will receive 17.5% of the common stock issued by the restructured GM and warrants giving the VEBA the right to purchase an additional 2.5% of the reorganized company’s common stock.

Like an earlier agreement the UAW reached with Chrysler L.L.C., GM’s deal will eliminate retiree vision and dental benefits effective July 1. The UAW said further adjustments of retiree health benefits are likely in 2010 and 2011.

While an exact figure of how much the latest agreement will save GM is not available, GM said the savings will eliminate the wage and benefits gap with its competitors.

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

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A union group called Warehouse Workers United blocked an intersection in Southern California on Thursday, May 28, by handcuffing people around a forklift in the middle of the road in an effort to focus attention on warehouse workers. In a press release, the group said it wants to persuade companies in the warehouse district to end the system of temporary employment.

It said temporary workers hired through unions are “paid meager wages, have no access to affordable health care and are denied the right to choose to form a union, and suffer the additional burden of being unable to collect unemployment benefits when they are let go.”

The group said the intersection was a central point for trucks heading to warehouses used by companies such as Wal-Mart, Target and Home Depot.

A report in the San Bernardino Sun newspaper said about 200 people blocked the intersection of Van Buren Boulevard and Etiwanda Avenue in Mira Loma, California. A fight also broke out between some protesters and a motorist who tried to drive past the blockade, according to the report.

The Riverside County Sheriff’s Department reported that traffic was obstructed for more than an hour and that 11 people were arrested for creating a public nuisance.

—Staffing Industry Analysts

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