Category: Archive

The United Auto Workers union has reached tentative agreements with the Detroit Three on concessions to help the automakers weather the recession.

But the thorny issue of swapping debt owed to retiree health care funds for company stock remains unresolved.

General Motors and Chrysler were seeking concessions as part of their viability plans for federal bailout money. Ford Motor Co. is not seeking bailout money but wanted parity with Chrysler and GM.

A source familiar with the talks said the concessions involve overtime, bonuses and limits on unemployment benefits.

But the UAW had not reached agreement on a proposed debt-for-equity swap with Chrysler and GM, a condition of federal aid to the automakers. The Bush administration, which loaned money to GM and Chrysler in December, wanted the UAW to take half of the remaining money owed to its voluntary employees’ beneficiary associations in company stock.

In a statement Tuesday, February 17, UAW president Ron Gettelfinger said, “Discussions are continuing regarding the Voluntary Employees’ Beneficiary Associations at all three companies.

“The UAW is withholding the terms of the tentative understanding pending completion of the VEBA discussions and ratification of the agreements.”

A source involved in the talks said that Chrysler has reached agreement with the UAW on concessions including limiting overtime and supplemental unemployment benefits.

On the eve of filing its viability plan to the federal government, Chrysler got the UAW to move on several fronts, the source said. Instead of paying overtime for work beyond eight hours, Chrysler will pay overtime only for work beyond 40 hours during a week, the source said.

The union gave up two of the four lump-sum bonuses due workers during the four-year contract, the source said.

Supplemental unemployment benefits also have been limited. Idled workers with more than 20 years of service can collect supplemental pay for 52 weeks at the traditional 72 percent of take-home pay and another 52 weeks at half pay, the source said.

Workers with less than 20 years get 72 percent supplemental unemployment pay for 39 weeks and half pay for an additional 39 weeks, the source said.

Those supplemental unemployment provisions are all that UAW members can get now that the Jobs Bank has been eliminated. The Jobs Bank was a program that guaranteed idled workers 95 percent of pay and full benefits indefinitely if no other job could be found for them.

Chrysler and GM were required by the 2007 contract to pay up to $4 billion for the Jobs Bank and supplemental unemployment pay during the four-year agreement.

The source did not have a dollar savings for the concessions. Chrysler and GM are turning in their viability plans today detailing how they are cutting costs and restructuring for long-term survival.

UAW PRESS RELEASE:

The following statement was released Tuesday, February 17, by UAW president Ron Gettelfinger:

“The UAW has reached tentative understandings with Chrysler, Ford and General Motors on modifications to the 2007 national agreements. The changes will help these companies face the extraordinarily difficult economic climate in which they operate.

“Our vice presidents and bargaining committees are to be commended for doing the best job possible for our membership under these difficult circumstances. The solidarity, support and patience of our membership, active and retired, have been instrumental in helping all of us through these challenging and unprecedented times.”

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

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

More than 3,000 people stood in line for hours outside a Georgia workforce training office this week to apply for $10-an-hour jobs at Korean auto parts supplier Sewon America.

That’s more than five times the roughly 600 positions that Sewon expects to eventually fill at its new factory under construction in LaGrange. Sewon will make stamped chassis and body parts for Kia Motor Corp.’s factory in nearby West Point when it opens in November.

Sean McMillan, a director with workforce training agency Georgia Quick Start, said he arrived at 6:30 a.m. Monday to find 200 people standing in line.

One woman had driven from Ohio the night before and slept in her car, says McMillan, who called the experience “sobering.”

“Many of these people, particularly locally, have watched Kia’s facility being built, and with that there’s been a lot of anticipation. As times have become tougher, I think the hope—and that’s a word you don’t hear a lot lately—has grown,” he said.

Sewon’s three-day hiring blitz was a bright spot in a week dominated by news of job cuts at Nissan Motor Co., General Motors and supplier BorgWarner Inc. But with all the excitement in LaGrange, there was also a dose of reality.

Sewon is hiring in waves. It will take on 300 workers this year in several groupings, and the rest later.

Indeed, of the 3,050 people who submitted applications, McMillan said he expects 80 to 100 to make it to the next round for the first wave: pre-employment training that starts next week.

From that group, Sewon will probably offer jobs to 25 to 30, he said. Others will have to wait for the next hiring wave later in the year.

Those odds led the LaGrange Daily News to observe that “ ‘American Idol’ auditions might be easier than landing a position at the new Sewon America plant.”

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

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

Still refraining from laying off any North American workers, Toyota Motor Corp. said Thursday night, February 12, that it is freezing wages, reducing hours and adopting a voluntary exit program.

The new measures, which Toyota dubbed a “shared sacrifice” philosophy, come as the automaker faces its first financial losses since 1950 and the unfamiliar specter of idle factory lines.

Toyota has gone out of its way to keep its mostly nonunion U.S. and Canadian production workers on the clock, even as it has shut down assembly lines.

But a statement released by Toyota Motor Engineering & Manufacturing North America Inc., the company’s U.S. manufacturing headquarters, said there is now a “strong possibility” that it will reduce work and pay at some plants.

Toyota is considering a schedule in which some workers would work 72 hours in a typical 80-hour two-week period.

Toyota also said it will:

• Add three to eight additional nonproduction days per factory to its North American schedule through April 30.

• Reduce bonuses for hourly workers.

• Eliminate bonuses for North American executive and salaried workers.

• Offer no wage increases “for the foreseeable future.”

The company will also offer a “voluntary exit program” for workers who want to leave. That plan will provide 10 weeks of pay, two weeks of compensation for every year an employee has worked, and a $20,000 lump payment to any worker who wants to leave.

Spokesman Mike Goss said Toyota has no target to reduce headcount and does not expect many of its employees to leave.

Goss also said that the elimination of executive and salaried bonuses represents about a 30 percent reduction in total compensation of the affected personnel.

“We’re trying our best to keep everyone employed,” Goss said. “We feel that with the reduced workweeks and bonus eliminations, we’re getting into the position we need to be in.”

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

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

Executives at companies getting federal aid would face stiffer limits on bonuses and severance under the stimulus bill that could be passed by Congress on Friday, February 13, than they would under President Barack Obama’s order earlier this month.

They would, however, face no salary cap under the legislation. The presidential order imposed a $500,000 limit on senior executives at several companies receiving extraordinary aid under the federal bailout.

The legislative limits also would be extended to many more companies than the number affected by the Obama order, according to a copy of the $789 billion economic stimulus bill agreed to by House and Senate negotiators late Thursday.

The Obama curbs were limited to a few companies such as AIG, Citigroup, and Bank of America, while the legislation also would apply to the hundreds of banks receiving aid under the $700 billion bailout.

What’s not yet clear is how the legislation, if passed by Congress and signed into law by Obama, would jibe with the provisions of his executive order.

“To the extent that something in the law contradicts something in the executive order, the law will take precedent,” said Brookings Institution scholar Thomas Mann, an expert on the federal government. “Otherwise, they may both be in force.”

The Treasury Department is due to issue specific rules implementing the stimulus legislation within the next year, though Obama could simplify the agency’s task by withdrawing his order, Mann said.

“For now, though, it’s all cloudy,” he said.

Senate Banking Committee Chairman Chris Dodd, D-Connecticut, sponsored the executive-pay provision in the bill.

“These tough new rules will help ensure that taxpayer dollars no longer effectively subsidize lavish Wall Street bonuses,” Dodd said.

Bonuses could be paid only in stock that would vest after the financial institution repays its federal loan, the legislation says. The size of the bonus would be limited to a third of the executive’s total annual compensation.

Bonuses could be “clawed back” if they were found to have been paid on the basis of misleading public statements that inflated the value of the stock.

The average 2007 pay for chief executives at 200 large companies was nearly $12 million, with the vast majority of that compensation coming in the form of bonuses, according to industry studies.

Under the Obama order, the size of executive bonuses was not restricted, though they did have to also take the form of long-term incentives that could vest only after federal aid was repaid.

A $400,000 executive pay cap and stiffer bonus curbs that passed the Senate were removed in conference between senior Senate and House members Thursday.

An amendment sponsored by Sens. Ron Wyden, D-Oregon, and Olympia Snowe, R-Maine, would have penalized companies that paid bonuses greater than $100,000 to executives after getting bailout money.

The legislation being considered Friday prohibits severance packages for the top executives at firms getting federal aid. The Obama order limited these so-called “golden parachutes” to three times the executive’s annual pay.

Under the bill, each company getting more than $25 million in aid would have to establish a board compensation committee made up of independent directors to review employee pay at least semiannually.

“We applaud the absence of a salary cap, which we think would restrict companies’ ability to keep employees they need to turn the companies around,” said Charles Tharp, executive vice president at the Washington-based Center on Executive Compensation, which is funded by member companies. “We also applaud the fact that the boards of directors will have a primary role.”

Under the bill, the restrictions would apply to at least the 25 highest-paid employees at firms receiving more than $500 million, and to at least the 15 highest-paid executives at firms getting between $250 million and $500 million.

At banks getting between $25 million and $250 million in aid, the prohibition would apply to at least the five best-paid executives. It would apply to only the highest-paid employee at firms receiving less than $25 million in aid.

Companies that have received more than $500 million in aid include Citigroup, American International Group, Bank of America, JPMorgan Chase, Wells Fargo, Goldman Sachs, Morgan Stanley, PNC Financial Services Group and US Bancorp.

The legislation also would require all companies getting aid to submit executive compensation to an advisory shareholder vote, a requirement long sought by investor advocates for all companies.

The Treasury secretary also would have to review compensation paid to the top 25 employees of each company that has gotten aid since the assistance began in October.

If these payments were found to be “contrary to the public interest” or the purpose of the legislation, the secretary could negotiate for reimbursement.

The board of any aid recipient must have a company policy for luxury expenditures such as corporate jets, entertainment and office renovations.

Citigroup recently canceled a $50 million purchase of a luxury jet from France after it became public.

The CEO and CFO of each aid recipient also would have to provide written certification that their company is complying with the legislative requirements.

—Neil Roland

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

House and Senate negotiators reached a final agreement Wednesday, February 11, on the massive stimulus bill, which is expected to receive final approval from the House and Senate by Friday.

The conferees’ agreement is similar to COBRA provisions approved by the Senate this week. Under that measure, the subsidy would have been 50 percent of the premium and it would have been available for up to 12 months.

The earlier House version called for a 65 percent premium subsidy up to 12 months. It also would have allowed employees with 10 years of service and those 55 and older to retain COBRA until eligible for Medicare, a potentially decades-long entitlement that business groups successfully fought to have removed.

According to a draft summary of the final compromise bill, the COBRA premium subsidy would not be available to individuals with an annual income exceeding $125,000 or to couples with annual incomes exceeding $250,000.

Like the earlier bills, the compromise measure would require employers to locate employees laid off since September 1, 2008, who declined COBRA to tell them they have a new right to opt for the coverage with the government picking up 65 percent of the premium.

Individuals would have 60 days after receiving the notification to sign up for the coverage. The subsidy would be prospective, applying to future premium payments.

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

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

 

Health care for UAW retirees is looming as a major controversy in crucial bailout negotiations at General Motors.

The United Auto Workers won’t accept further concessions on retiree health care costs unless GM creditors make substantial sacrifices to reduce the automaker’s crushing debt burden, said a source familiar with the union’s position.

Only six days remain until GM and Chrysler file viability plans with the federal government. Those plans are supposed to include major cost-cutting sacrifices by all stakeholders.

Under the terms of a $13.4 billion emergency loan commitment, the federal government wants two-thirds of GM’s debt exchanged for equity.

GM and government officials met with bondholders and creditors in Detroit on Monday, February 9, to see whether the creditors would do so. Those creditors hold $45 billion worth of GM debt. GM spokeswoman Julie Gibson declined to comment.

The UAW is insisting that the creditors make concessions, the source said. So far, the union thinks, it is the only party—among bondholders, dealers and suppliers—that has made major concessions to help GM keep its loans.

The government can call in the loans and put both GM and Chrysler in Chapter 11 bankruptcy if officials deem the viability plans inadequate. The union wants to avoid that outcome, the source said. But union officials think they cannot continue to bear what they call a disproportionate share of the sacrifices.

The debate centers on the UAW’s retiree health care trusts, known as voluntary employee beneficiary associations. Under terms of the federal bailout, the UAW is supposed to accept GM stock in place of cash for half of the automaker’s $26 billion obligation to the health care trust.

That’s a big problem for UAW president Ron Gettelfinger, the source said.

Gettelfinger insists that the union already swallowed a massive concession when it negotiated the VEBAs in 2005 and 2007, the source said. Together, those earlier agreements cut GM’s UAW health care obligation from $50 billion to $26 billion.

Now the union is being asked to take risky GM equity for half the remaining $26 billion obligation. That’s an untenable sacrifice when other stakeholders haven’t even anted up yet, the source said.

“That’s what Ron means when he says the UAW has gone to first base, second and third to help GM when the others haven’t even entered the stadium,” the source said. UAW spokeswoman Christine Moroski declined to comment for this story.

What’s more, the UAW last month agreed to end the Jobs Bank at the Detroit Three. Under the Jobs Bank, long-term idled workers collected about 95 percent of wages and benefits while not working. The Jobs Bank could have cost GM alone up to $2.1 billion over the four-year life of its UAW contract signed in 2007, the contract shows.

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

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

General Motors expects the current round of hourly worker buyouts to be its last.

Workers who don’t take the deal face the prospect of future cuts without such a safety net.

“It’s unlikely we’ll have another attrition program,” said GM spokesman Tony Sapienza.

The automaker hopes the latest buyout program will yield enough savings that further programs wouldn’t be necessary. But the veiled threat is that future cuts in workers may not include incentives.

GM is using buyouts and retirement incentives to cut its workforce as the carmaker tries to prove its long-term viability to federal officials. GM and Chrysler have to present to the government business plans Tuesday, February 17, proving their viability as part of a $17.4 billion federal loan commitment to the companies.

The automakers are being told to bring their labor costs in line with the Japanese transplants. Bondholders, suppliers and dealers also are expected to make sacrifices.

First-quarter production cuts of more than 50 percent have added to the urgency of slashing employment at GM’s factories.

GM believes its prospects are good for a decent take rate on the buyouts, Sapienza said. Of the company’s 62,000 UAW-represented U.S. employees, about 22,000 are eligible to retire, he said.

To coax those workers to leave, GM is offering $20,000 cash and a $25,000 voucher for a GM vehicle. Another part of the incentive program allows workers 55 years and older with at least 10 years of service to retire with full retirement benefits.

Workers not eligible for retirement who take a buyout get $20,000 cash and a $25,000 vehicle voucher. They won’t receive retiree health care benefits, only their accrued pension.

GM sees no further buyouts on the horizon because reductions from the current program are likely to bring the workforce to a sustainable level once car sales return to more normal levels, Sapienza said.

At some point, the carmaker hopes to be able to hire so-called two-tier workers who will earn about half the $28 an hour paid to veteran workers. Those two-tier workers also will receive half the benefits of veteran workers.

GM’s current round of buyouts is less generous than those of last year. Retirees received their $45,000 all in cash last year. Those taking a buyout while relinquishing future retiree health care received $100,000 in cash. About 18,000 left under both programs in 2008.

This year, GM’s buyout offerings are more limited because of the company’s strained finances and the automaker’s inability under the federal loan agreement to use its pension fund to pay the incentives. GM paid its participants from the pension fund last year, Sapienza said.

Chrysler is offering a buyout program similar to GM’s, but with heftier incentives.

Retirement-eligible Chrysler workers who leave will receive a $50,000 incentive plus a voucher of $25,000 for a new Chrysler vehicle.

Chrysler workers not eligible for retirement who take a buyout get $75,000 and a $25,000 car voucher, and no retiree health care benefits.

The recently announced end of the Detroit 3 Jobs Bank also might prod workers to retire.

That safety net allowed idled workers to earn about 95 percent of pay and benefits after they had exhausted state unemployment and supplemental benefits.

Without the Jobs Bank, idled workers have just 48 weeks to collect unemployment and supplemental benefits that together bring pay to about 72 percent of regular take-home.

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

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

A Texas lawmaker on Monday, February 9, introduced legislation that would prohibit employers from banning firearms in their parking lots.

S.B. 730, introduced by state Sen. Glenn Hegar Jr., would also eliminate employers’ liability for damages in cases involving guns stored in their parking lots, except in instances of gross negligence.

The Austin-based Texas Association of Business has opposed past efforts to allow guns on employer property, arguing that its members need to control their premises to maintain a safe environment for workers.

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

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

After weeks of delay, a Senate committee quickly approved the nomination of Rep. Hilda Solis, D-California, as the next secretary of labor on Wednesday, February 11.

The Senate Health, Education, Labor and Pensions Committee gathered for a two-minute meeting off the Senate floor during a break in other business to OK Solis by a voice vote, according to the Associated Press. Two Republicans on the panel voted against Solis.

Her nomination now heads for a vote by the full Senate, which could come this week.

Solis had her hearing on January 9. Since then, the process has been stalled. Last week, a committee vote was abruptly canceled when it was revealed that Solis’ husband had just paid $6,400 in tax liens against his auto repair business the previous day.

Tax problems dogged Treasury Secretary Timothy Geithner before he was confirmed, and they sank the nomination of former Sen. Tom Daschle, D-South Dakota, as health and human services secretary.

Solis faced other challenges from Republicans. After her hearing, they submitted written questions regarding her position on a bill that would make it easier for workers to form unions and her service as the unpaid treasurer of American Rights at Work, an advocacy organization. The GOP said that she failed to address those and other issues in her testimony.

Sen. Edward Kennedy, D-Massachusetts and chairman of the HELP Committee, said Solis, the daughter of immigrants who also were union members, would respond to the challenges facing the U.S. workforce during the recession.

“Hilda Solis comes from a working family herself, so she understands how the troubled economy is hurting average Americans,” Kennedy said in a statement. “American workers deserve to have her voice and her leadership as their secretary of labor, and I’m pleased that our committee approved her.”

Once Solis is put before the whole Senate, any member could prevent a vote by placing a “hold” on it. Her nomination would almost certainly prevail in a roll-call vote. Democrats hold a 58-41 majority, with a disputed Minnesota race still pending.

A White House spokesman said Wednesday that he anticipates Senate approval.

“I think that process will hopefully conclude quickly,” said Robert Gibbs, White House press secretary. “The president has confidence in her ability to continue the department’s mission.”

One of the stumbling blocks for Solis centers on a union measure, the Employee Free Choice Act. It would allow a union to form when a majority of workers sign authorization cards and prevent companies from requiring a secret-ballot election supervised by the National Labor Relations Board.

Organized labor’s top legislative priority, the legislation is fiercely opposed by Republicans and business interests. Solis’ sentiment is no mystery. She is a co-sponsor of the bill, as was President Barack Obama when he was in the Senate.

Unions want Congress to act quickly on the measure, which could sharply increase the number of workers covered by collective bargaining units. Currently, about 7 percent of private-sector employees and 12 percent of the overall workforce belong to a union.

—Mark Schoeff Jr.

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