In an email to
U.S.-based executives, CEO Rick Wagoner and COO Fritz Henderson warns that the automaker needs to make further workforce cuts, despite the fact that the number of employees who accepted early retirement packages in 2008 exceeded initial predictions.
They announced that they will "initiate involuntary separations in some areas of the business, late this year and early in 2009." The step is necessary, they say, to address the increasing need to conserve cash that GM has been burning through at $1 billion a month, a rate that is unsustainable. In the message, the GM leaders also outlined the compensation packages available to salaried employees to be released Thursday.
The compensation program will continue to offer health care for salaried employees with a Health Savings Account PPO, an enhanced PPO and Health Maintenance Organization (HMO) programs in certain areas. On a positive note, sickness and accident benefits will be increased significantly and life insurance benefits have also been increased.
There is no good news for retirees, who, as announced in July, will be losing coverage once they reach Medicare eligibility, including the special benefit for Medicare Part B worth $76.20 per month in exchange for a $300 increase in the pension.
Additionally, Wagoner and Henderson say that there are changes to the salaried employee benefits including suspension of the stock savings match with effect from Nov. 1, delays in the timing of allocations of benefit allocations under the stock program and various other changes, including the salaried tuition assistance plan, effective Jan. 1, 2009.
In a warning of things to come, GM today also announced that the separation programs are changing, and not for the better. Severance and separation packages will be modified effective March 1, halving the basis for payments under the GM severance program to one-month base salary per year of service up to six months instead of 12 and under the mutual separation program, reducing the maximum from six months to four.
For both programs GM will continue offering full health coverage benefits for the duration of the reduced severance period.
Unusually pessimistic for GM leaders, Wagoner and Henderson recognized that the global credit crisis has dramatically affected the North American and Western European markets and that the global outlook is very concerning. The email encourages those executives considering the retirement window to exit the organization and ends as always with the GM mantra that "As always, your continued support and leadership are truly valued during these difficult times."
Earlier this week, GM was reportedly seeking a
from outside investors as a possible alternative to a deal with
. The report surfaced after word GM was having trouble securing financing for a
purchase of Chrysler
Shares of GM were lately up 9 cents, or 1.5%, at $6.28. Rival
was adding 2 cents, or 0.9%, to $2.12.
TheStreet.com Staff Reporter Rob Holmes contributed to this report.
Gavin Magor joined TheStreet.com Ratings in 2008, and is the senior analyst responsible for assigning financial strength ratings to health insurers and supporting other health care-related consumer products, including Medicare supplement insurance, long-term care insurance and elder care information. He conducts industry analysis in these areas. He has more than 20 years' international experience in credit risk management, commercial lending and analysis, working in the U.K., Sweden, Mexico, Brazil and the U.S. He holds a master's degree in business administration from The Open University in the U.K.