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GM Saves Money But Isn't Much Smaller After Buyout Program


DETROIT -(Dow Jones)- General Motors Corp. (GM) spent $3.3 billion to clear out 17,000 hourly workers this summer, but its blue-collar ranks shrunk by just 7,000 from what the auto maker reported when it launched the massive buyout program.

While GM's payroll hasn't shrunk dramatically, the auto maker said it is saving money because it has been able to bring in lower-paid new hires and clear workers out of the so-called jobs banks for laid-off employees.

"It's not a matter of just getting folks out," spokesman Tony Sapienza said. " There is a lot of savings potential with the jobs banks and new hires."

The buyout program was central to the struggling company's efforts to get the size of its U.S. workforce in line with reduced demand for its vehicles.

GM said it had 74,000 active hourly workers this spring, when it rolled out the deals and retirement incentives to its entire United Auto Workers- represented workforce.

All but 2,000 of the 17,000 workers who opted to leave under the buyout program no longer work for GM, Sapienza said. Another 8,000 workers are temporary employees, new hires or workers who transferred to GM from Delphi Corp. (DPHIQ) as part of a deal with the bankrupt parts spinoff, Sapienza said. The numbers also include about 3,000 workers hired to staff extra shifts at factories in Lordstown, Ohio, and Orion, Mich., to meet demand for hot-selling cars.

GM also has been able to reduce its jobs banks, a set-up in which laid off workers receive most of their pay and benefits, by creating openings for those workers.

GM, under last year's labor deal with the UAW, won the right to replace veteran workers with new hires who will be paid roughly half the $28 average hourly wage and receive less-rich benefits than existing employees.

The two-tier wage structure was a critical element of the landmark deal, which also will allow GM to shift nearly $40 billion in retiree health care obligations to the union by 2010 in the form of a company-funded trust.

Combined, the measures were intended to bring the auto maker's cost structure more in line the U.S. operations of leaner foreign-based rivals.

But before GM can bring on those new hires, it must find space for Delphi workers and its own employees who are laid off or will be as part of GM's North American restructuring.

GM, mired in years of red ink and burning through an estimated $1 billion a month, has zeroed in on slashing labor costs as a major part of its turnaround plan. The auto maker has said the deal will cut labor costs by up to $5 billion a year.

This year's buyouts came just a few years after GM shed more than 34,000 hourly workers as part of a similar program. Ford Motor Co. (F) and Chrysler LLC had similar initiatives.

-By Sharon Terlep, Dow Jones Newswires; 248-204-5532; [email protected]

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