As many of you know, I currently work for Chrysler as an engineer. The interesting part is that the engineers in my department belong the the UAW.
Those who are starting to boo and hiss can now quietly move along to another blog…
Current readers may recall an earlier post detailing my initial reaction to receiving a buyout package, and musing/agonizing over what to do. And having a couple of weeks to think about it and getting more information does help make a decision. So…
Unless something earth-shattering happens in the next couple of weeks, I’m taking the buyout.
We got the numbers last Friday afternoon that management wants to reduce the headcount in the department. In my classification, that number is 8 to 10. I’m 7th from the bottom in seniority. So unless more than 3 people ahead of me accept the buyout, I would be laid off January 30.
Currently, if laid off, I would receive around $300 from the State of Michigan for unemployment, and by Contract, would also receive a supplement (called SUB pay) from the company that would raise the total amount of compensation to approximately 95% of my take-home pay. If laid off for more than 48 weeks (the length of time that unemployment benefits are available from the State), then I would go into the “jobs bank” for a period of one year & one month and receive 100% of my take-home pay.
Sounds good so far except there is a problem – the Union and Chrysler are opening up the Contract per the terms of the government loans.
The Union has already stated that the jobs bank will be suspended and eventually abandoned. What I see happening is that the SUB pay is going to be reduced if not eliminated, and for those who are still employed will see a wage cut. There are enough rumblings through the ranks of the automotive analysts and more than a few politicians to support this course of action.
While the Union and management may agree on the above, the rank and file have to vote on it. If approved, then the amount of unemployment pay is going to be reduced or eliminated, and that means that my wife and I couldn’t live on just her salary with whatever I would get in unemployment & SUB pay. If voted down, then the government calls in the loan, Chrysler folds, and things get worse whether I’m still employed or not.
Of course, there is still the big question mark whether Chrysler is going to survive or not. The following excerpts are from The Detroit News, and is the third article that I’ve read in the past week that states Chrysler won’t make it.
“GM and Chrysler are insolvent. Without federal funding they are bankrupt,”
“Chrysler will go away … Most cats don’t have that many lives.”
Chrysler needs $6 billion to pay its suppliers for last quarter’s parts … suspects the full $4 billion loan went towards these payments. Chrysler initially sought $7 billion from the government.
The current throughput numbers (vehicles sold per dealer) for Chrysler is 415. Ford is at 490, GM is 440.
At less than 40 vehicles a month, and assuming $1,000 profit per sale, the average Chrysler dealer is trying to pay staff and costs while only pulling in $40,000 a month, said Sheldon Sandler, CEO of Bel Air Partners, which provides financial services to dealers. “That’s just not sustainable.”
There is a great imbalance as the Big Three have 64 percent of dealers but only 47 percent of the market, Sandler said.
And while reducing the dealer body is part of the cost-cutting plans for GM and Chrysler, they still are up against state laws preventing the arbitrary closing of a franchise. Dealers also are not likely to go away quietly, as most own their facilities and the real estate, and rely on them for their livelihoods.
Manufacturers must buy dealers out, but they don’t have the money to do so. When GM eliminated the Oldsmobile brand, it cost about $1.2 billion to settle with the dealers. “Dealers are deer in the headlights right now,” Sandler said. “They’re trying to figure out how they are going to stay in business knowing no one will buy them out. They will either make it or fall off a cliff and lose everything.”
As for the United Auto Workers, Sean McAlinden (chief economist for the Center for Automotive Research) said what the automakers really need from them is relief from the huge payments into the health-care trust fund, which can be achieved by accepting equity instead of cash. The union fought that proposal during the 2007 contract negotiations that created the trust fund. The UAW represents about 33,000 active workers and 95,000 retirees at Chrysler. McAlinden forecasts the Chrysler work force to be reduced to 17,000 by 2012 — or says 17,000 is the number of Chrysler workers that will be absorbed by GM in the event of an acquisition by the larger carmaker. But he recommends potential buyers wait until after Chrysler has gone bankrupt, shed its liabilities, and can be bought for fire sale prices. (emphasis mine)
All of the above just adds to the stress-related heartburn that I’ve been having in addition to the muscle pull in my neck…
The amount that I would get from the buyout would be approximately a year’s salary after taxes. My wife and I could, worst case, live on that for a year to a year & a quarter before having to dip into savings. But I don’t think it would come to that.
I’ve got several resumes out there, and have a lukewarm response from one of them already. I don’t know if this job would work out or not, but I am hopeful – a couple of recruiters have already called me. But I’m not holding my breath for a quick turnaround – Michigan is at a 9.7% unemployment rate, and there are a lot of people out there looking for a job.
Yeah, it’s going to be a hellava long, bumpy ride…