Lordstown feels pain of GM cuts

By Don Shilling

Union and management must sacrifice for GM to receive federal aid, analysts say.

General Motors is cutting production at Lordstown and four other factories as the domestic automakers consider much larger changes in their fight for survival.

Look for those changes to include the end of the jobs bank, which pays workers who are laid off, and cuts in executive compensation and benefits, analysts said.

As GM debates such changes, however, it is adjusting work schedules to align production with demand.

The automaker said Friday it is canceling a week of production in January at four plants and moving up the closing of a truck plant in Oshawa, Ontario. On the other hand, GM added a week of production at a van plant and reinstated some overtime that previously had been taken away at four other plants.

Lordstown is one of the plants that is losing production.

GM canceled production the week of Jan. 5. Production already had been eliminated for the week of Jan. 12, so workers won’t return from their Christmas break until Jan. 20. The last workday of 2008 is Dec. 23.

Workers will get holiday pay for the first two weeks, then go on layoff.

GM also said Friday that overtime production on Saturdays has been eliminated at the Lordstown complex for the rest of the year.

GM previously said it was slowing down the assembly line in January so fewer Chevrolet Cobalts and Pontiac G5s are produced. About 1,060 hourly workers are being laid off and 40 salaried jobs are being eliminated.

One worker, who did not want to be identified, said Friday that union leaders warned of further cuts if car sales don’t pick up.

As GM waits for sales to recover, it is fighting to stay solvent.

The domestic automakers were stung Thursday when congressional leaders refused to consider their request for $25 billion in loans. GM has said it’s in danger of reaching a point where it doesn’t have enough cash reserves to fund its daily operations.

Congressional leaders told the automakers to return Dec. 2 with a plan for how they were going to rebuild and modernize their industry.

Both the United Auto Workers and automakers will have to persuade congressional leaders that they are sacrificing in order receive taxpayers’ money, said John Wolkonowicz, an analyst with Global Insight in Lexington, Mass.

Tops on the list is the elimination of the jobs bank, Wolkonowicz said.

“Either that is gone or the auto industry is gone,” he said.

The Detroit Free Press reported that the UAW is in negotiations over eliminating the benefit.

When UAW autoworkers are laid off, they receive a combination of unemployment benefits and supplemental pay from their employer for 48 weeks. If they remain laid off beyond that, they move to the jobs bank, where the company provides about 95 percent of their pay and benefits.

Not only will the jobs bank be eliminated but so will some of management’s compensation, including the payment of large bonuses, said Dennis Virag, president of the Automotive Consulting Group in Ann Arbor, Mich.

“Executives must step up and demonstrate that they are willing to share in the pain,” he said.

Wolkonowicz said he expects to see the elimination of management perks such as company cars with free gas and insurance and executive dining rooms.

He said both the CEOs and UAW President Ron Gettelfinger handled their appearances in Washington poorly this week. He noted that the CEOs took heat for flying in on corporate jets and the union boss seemed content to point to concessions made in a 2007 union contract.

“The idea was that they had given enough already. If they come back and say that again, it will torpedo any chance of getting bridge loans,” Wolkonowicz said.

In addition to these cost-cutting measures, Congress is demanding a business plan from the automakers that shows how they will be viable in the future.

Wolkonowicz said he thinks Sen. George Voinovich, R-Ohio, issued the proper challenge to his fellow lawmakers. Voinovich asked that lawmakers provide the auto industry with a set of criteria that they will use to judge the business plan.

The tricky part of the requested plan is that legislators want to know what the automakers will do to improve fuel economy and protect the environment, Wolkonowicz said. Such improvements are expensive, however, he said.

Both Wolkonowicz and Virag said they expect the automakers and the UAW to return much better prepared Dec. 2. The analysts said they think the loans will be approved for the automakers because allowing the domestic auto industry to collapse would be devastating for the nation’s economy.

Congressional leaders said they would reconsider the loans Dec. 8 if they are pleased with the presentations on Dec. 2.

shilling@vindy.com