GM and Delphi reach agreement with UAW

General Motors and Delphi Corp. have reached an agreement with the United Auto Workers to cut labour costs.

Both GM and Delphi have been struggling with labour costs that have been instrumental in pushing both companies into the red.

The agreement, which includes offering early-retirement buyouts to 113,000 U.S. hourly workers, comes at an important juncture for the automaker.

Just last week, it reported a loss of US$10.6 billion in 2005, a full US$2 billion greater than expected. GM has been losing market share and profitability. GM and and independent analysts have both pointed to emerging from existing labour agreements that curtail flexibility and the ability to close unprofitable operations as important to its long-term survival.

The agreement will also benefit Delphi, the largest U.S. auto parts supplier, which is a former GM subsidiary and as such has operated under many of the same labour agreements hammered out before it became independent several years ago. It is currently reorganizing in bankruptcy court after filing for Chapter 11 protection in October.

About 100,000 GM workers will be eligible for payouts of between US$35,000 and US$140,000 depending on years of service. GM says retirements could begin as early as June 1. GM plans to cut 30,000 workers by 2008.

For Delphi, the plan requires bankruptcy court approval. As many as 5,000 workers will be eligible to return to GM, Delphi’s former parent company, while 13,000 U.S. hourly workers will be eligible for a lump sum payment of up to US$35,000 to retire. Delphi has about 34,000 U.S. hourly workers overall.