Sweeping Buyout Planned at GM

The United Auto Workers has reached agreements with Delphi Corp. and General Motors Corp. on a restructuring plan that will speed up the retirement or transfer of more than 100,000 blue-collar workers from both companies.

GM officials also said the agreement will include a combination of early-retirement incentives and other considerations to help reduce employment levels at both GM andDelphi in a manner that benefits both eligible employees and both companies.

“When we announced the capacity rationalization and employment reduction plan late last year, we said we’d be working with UAW leadership to develop an accelerated attrition program that would help us achieve needed cost reductions as rapidly as possible, while at the same time responding to the needs of our employees,” said GM Chairman and Chief Executive Officer Rick Wagoner.

“We are pleased that this agreement will help fulfill that important objective. In addition, the agreement will enhance the prospects for GM, the UAW, and Delphi to reach a broad-based consensual resolution of the Delphi restructuring.”

The program will be offered to all GM hourly employees, but overall acceptance rates will depend on individual employee decisions. The program also permits the flow of UAW-represented Delphi employees back to GM until September 2007. In addition, eligible UAW-represented Delphi employees may elect to retire from Delphi or flow back to GM and retire.

“We remain focused on the transformation of Delphi in order to emerge successfully from the Chapter 11 reorganization process and provide a strong foundation for our future,” said Delphi President and Chief Operating Officer Rodney O’Neal. “An accelerated attrition plan will help enable the transformation of our U.S. manufacturing and support operations into a much more competitive cost base.”

The agreement is subject to approval by the Bankruptcy Judge overseeing Delphi’s bankruptcy proceedings. Approximately 13,000 hourly union-represented employees may be eligible to participate in the plan, Delphi officials said.

In a key portion of the agreement, GM said it will provide substantial financial support under the proposed plan, which is subject to bankruptcy court approval. GM also agreed to take back 5000 workers as part of the agreement, which capped off more than a week of intensive negotiations between GM, Delphi, and the United Auto Workers.

GM has pledged to assume the financial obligations related to the lump-sum payments to be made to eligible Delphi U.S. hourly employees accepting normal or voluntary retirement incentives and certain post-retirement employee benefit obligations related to Delphi employees who flow back to GM under the plan. GM expects to record the cost associated with the attrition program in 2006. The cost will be incurred as employees agree to participate, according to GM, which last week raised its estimates of the cost of the buyouts and restructuring in a filing with the SEC.

The proposed plan for eligible U.S. hourly employees includes normal and early retirements, with incentives ranging up to $35,000. —Joe Szczesny