GM Pays Inflation Bonuses to UAW Retirees

General Motors, which is seeking a government bailout, paid up to $700 in year-end inflation adjustments to each of its 284,000 hourly retirees on Monday, December 15, said GM spokesman Tony Sapienza.

With an additional 73,000 surviving spouses receiving as much as $455 each, the total cost to GM may surpass $200 million.

Ford Motor Co. intends to make its payments next week, said Ford spokeswoman Marcey Evans. They will go to 115,000 hourly retirees as part of longstanding contract provisions with the United Auto Workers. Chrysler LLC did not respond immediately to a request for numbers on its payments.

GM’s cash crisis had retirees worried whether the so-called Christmas bonuses would come this year. GM has indicated it barely has enough cash on hand to stay in business into January.

Dick Danjin, a GM retiree and retired UAW representative, said he wasn’t surprised since payment is called for in GM’s union contract.

“Both the corporation and union are fully aware of the obligation,” said Danjin, who lives in northern Michigan. He said he received his payment.

The lump-sum payments help to offset inflation much as cost-of-living allowances paid to active employees do. They are often called “Christmas bonuses” by retirees because they arrive in December every year.

GM’s lump sums pay retirees $23.33 for every year of service, Sapienza said. The minimum payment is $233, and the maximum is $700. Ford’s payments are similar.

The money comes from the automakers’ pension funds.

GM and Chrysler are awaiting word from President George W. Bush on whether they will receive a federal rescue package. GM is asking for $8 billion. Chrysler wants $7 billion.

The president is weighing what strings to attach to the loans, which may be drawn from either the Federal Reserve or a $700 billion bailout package for banks and financial institutions.

Craig Fitzgerald, an auto analyst with Plante & Moran in suburban Detroit, said that if GM had failed to make the payments, the company would have risked a “world war” with the UAW.

Said Fitzgerald: “GM didn’t need that given all the other battles it’s fighting.”

Filed by David Barkholz of Automotive News, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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