The Association of U S West Retirees



GM Freezes 401(k) Outlays For White-Collar Staff
By John D. Stoll, Dow Jones Newswires
The Wall Street Journal
Friday, December 16, 2005

General Motors Corp. is freezing contributions to its 401(k) plan for white-collar workers and reducing severance benefits in an effort to respond to increasing pressures on the company's business.

GM spokesman Robert Herta said the Detroit auto maker will stop paying its standard 20 cents for each $1 that salaried workers invest in the company's savings plan. "The decision is based on current business conditions," said Mr. Herta, who didn't quantify the savings resulting from the change. The auto maker had cut its contribution from 50 cents to 20 cents in April.

GM didn't disclose details of the cuts to white-collar severance packages, but Mr. Herta said that "this is all about getting competitive with other auto makers."

The move comes as GM and rival Ford Motor Co. face pressure to demonstrate that white-collar workers will share in the pain felt by unionized hourly workers as they seek to trim costs. Both have reached concession agreements with the United Auto Workers, and both will be seeking to shutter plants and reduce their work forces in coming months. Ford of Dearborn, Mich., earlier this week said it will freeze what it pays for white-collar retiree health-care coverage and require salaried employees to assume more medical costs.

The two auto makers face big losses in the important North American market from intense competition, high labor costs and a decline in the popularity of their largest, most profitable sport-utility vehicles. GM has suffered $4.8 billion in losses in its North American automotive business in the first nine months of this year.

GM's changes were reported yesterday in the Detroit News.

Mr. Herta said GM currently employs 36,000 people in its U.S. white-collar salaried ranks, but expects to reduce combined salaried and contract workers by 7% in 2006. "We're going to continue to reduce our salaried work force as we have in recent years," he said. GM has trimmed its salaried work force 32% since 2000, and currently is adding staff mostly in specialized areas.

GM also said salaried employees who were opting to participate in the matching plan -- dubbed the Savings-Stock Purchase Program -- would no longer be required to invest 3% of the entire value of the plan in GM common stock. Mr. Herta said the change was made in an effort to offer employees more investment options.

GM has announced a major downsizing in the U.S., which includes 12 vehicle assembly and parts plants, and the shedding of 30,000 jobs. GM hopes to reduce North American structural costs by $7 billion starting next year.

The combined pretax health-care bill for GM and Ford is rising at a double-digit rate and nearing $10 billion annually. The Big Three's health-care burden is often cited as one of the biggest hurdles standing in the way of Detroit being competitive with Japanese and South Korean auto makers.

Write to John D. Stoll at