GM Might Face Tough Sell With Union Buyouts

General Motors has offered a deal to shed itself of much of its union-represented workforce, but it’s only the first of many steps the company must make to become competitive, observers say.

Last month, GM worked out a deal with Delphi and the United Auto Workers that allows the automaker’s113,000 UAW-represented hourly workers and 13,000 of Delphi’s 23,000 UAW workers to receive $35,000 to $140,000, depending on their seniority, if they retire early. But it remains to be seen how many workers will take the company up on the offer.

“I hope GM is better at selling buyouts than they are at selling cars,” says Gary Chaison, a professor of industrial relations at Clark University in Worcester, Massachusetts.

The buyout’s success will depend on how risk-averse the workers are, Chaison says. “The fact is, they don’t know what they will get if they reject it,” he says.

Assuming that many workers accept the offer, GM still runs the risk that its best workers, who are more mobile, will be the only ones to leave, says Gregory Homer, a partner in the Washington, D.C., office of law firm Drinker Biddle & Reath.

“There is a huge risk of brain drain,” he says. “Then GM ends up with a workforce that is less productive than it was before.”

The bigger question is what will GM do with the workforce that remains after the buyouts are over.

The company has a big challenge ahead in “repairing the relationships with the workforce,” Chaison says. The employees feel that they have been making lots of sacrifices, and those who stay may suffer from “survivor’s guilt,” he says.

“The workers now feel like there is no plan other than cutting costs,” he says. “The company has to communicate a plan to these workers so they feel encouraged.”

GM might actually get a morale boost in its workforce. Under the agreement with the UAW, the company will bring back 5,000 Delphi workers by September 2008.

“These people never wanted to leave GM in the first place,” says Arthur Wheaton, a workplace and industry education specialist at Cornell University. “So they may have a better attitude and be excited about turning the company around.”

On a broader level, GM needs to completely rethink how it wants its workforce to act, says Mark Neuberger, head of the employment law group of Buchanan Ingersoll in Miami. This means identifying the skill sets that are vital to compete and developing training and incentives to encourage those skills, he says.

GM has to become less bureaucratic, says Robert Chiaravalli, a labor lawyer and a principal at Strategic Labor and Human Resource in West Bloomfield, Michigan.

“They need to get lean quickly to make up for the potential skills gap created by workers leaving,” he says. This doesn’t just mean becoming smaller, Chiaravalli says. “They need to figure out how to inspire creativity and innovation to introduce better cars.”

—Jessica Marquez