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
John D. Stoll at