GM story from Bloomberg News

[4ophenia]

March 24 (Bloomberg) -- General Motors Corp., reeling from $10.6 billion in losses last year, will fire hundreds of its U.S. salaried employees starting next week, according to people familiar with the plan.

The firings, which begin March 28 at several locations on what employees are calling ``Black Tuesday,'' will be followed by another round in April, according to people at GM, who declined to be identified because the plan hasn't been made public. GM spokesman Steve Harris had no comment.

The workers will get GM's salaried severance package with no additional payments, the people said, unlike the buyouts of up to $140,000 and retirement incentives offered this week to 113,000 hourly workers in the U.S. Chief Executive Officer Rick Wagoner plans to reduce losses by slashing costs and jobs and selling assets while bolstering revenue by redesigning vehicles.

``They're liquidating, they're firing, they're retiring,'' said Sean McAlinden, a labor analyst at the Center for Automotive Research in Ann Arbor, Michigan. ``This is a GM that's getting in shape much faster than it's ever before in any past restructuring.''

Wagoner said in November that the Detroit-based automaker planned to reduce its salaried and contract workforce this year by about 7 percent. He didn't say how many workers would be affected. GM has 36,000 salaried U.S. workers and doesn't disclose how many contract employees it has, spokesman Robert Herta said.

GM stock was trading at $22.20 at 1:32 p.m. in Frankfurt, up from $22 yesterday in New York Stock Exchange composite trading. The U.S. shares have gained 13 percent this year.

`Getting Close'

``We're getting close to benchmark, if not at benchmark performance in salaried and contract executive levels versus our competitors,'' Wagoner said in a Nov. 21 press conference. ``By the same token we think we see areas to improve, so we will be pursuing those in '06.''

GM in January already fired several hundred U.S. contract workers, according to a person familiar with that action. Contract workers are employed by an outside company to perform work for GM. In the first quarter of 2005, GM paid about $148 million for the voluntary buyouts of 2,800 salaried employees, or 5 percent of the salaried workforce.

GM introduced a new severance package this year for employees who are fired, according to a document from GM's compensation policies obtained by Bloomberg and confirmed by people familiar with the program. The modifications were to ``ensure competitiveness in the marketplace.''

Employees with the company at least a year who are fired will be paid one month of their base salary per full year of employment, up to 15 months, according to the policy. Those workers also maintain their health-care insurance for that period and receive three months of outplacement assistance.

Job Cuts

GM's salaried and contract workforce had been cut 32 percent from 2000 to the end of last year, Wagoner said in November. When Wagoner took over as CEO in 2000, GM had 44,000 U.S. salaried workers, 18 percent more than it does now.

``I don't remember GM ever doing anything like this before, not firing people and putting them out on the street with a box,'' said McAlinden, who has studied GM's past restructuring plans. ``They were called `Mother GM' for a reason.''

The firings are the latest in several actions aimed at GM's salaried workforce. On March 7, that automaker said it will freeze defined-benefit pension plans for its 36,000 salaried workers and switch to a defined-contribution plan. That change will save GM, the world's largest automaker, about $420 million on a pretax basis in 2007 and reduce the Detroit-based company's year-end 2006 pension liability by about $1.6 billion.

Defined Benefits

Defined-benefit plans guarantee a set monthly stipend upon retirement. These plans differ from defined-contribution plans, such as a 401(k), which are funded by employer and employee contributions and grow until the account holder retires and begins withdrawals.

Wagoner also said Feb. 7 that he will slash his own compensation in half and trim pay by 30 percent for his three top lieutenants. GM earlier won $1 billion in annual health-care cuts from union employees, part of a plan to restore profit by trimming $7 billion in yearly costs.

GM in February said it will cut pretax health-care expenses by about $900 million a year by capping salaried health-care coverage at 2006 levels for eligible GM salaried workers. GM salaried employees hired after Jan. 1, 1993, don't get retiree health care. GM also halved its $2-a-share annual dividend.

Retirement Incentives

GM is also offering payments of $35,000 to get union workers with 30 years or more service to retire on a $36,000 pension. The $140,000 buyouts are for union employees not eligible for retirement and with at least 10 years at the company.

Cutting the dividend and salaried costs and compensation were moves suggested Jan. 10 by Jerome York, who was appointed to the GM board in February. York, an aide to billionaire investor Kirk Kerkorian, has said cuts in the salaried workforce were needed to carve deeper concessions from union workers.

Kerkorian, GM's fourth-largest investor, holds a 9.9 percent stake in the automaker through his holding company, Tracinda Corp. York said Jan. 10 that Kerkorian may buy an additional 12 million GM shares if the automaker follows his recommendations.

GM's 8.375 percent bond due in 2033, today's second most- traded debt in early trading, rose less than 1 cent on the dollar to 73.8 cents. The yield was little changed at about 11.5 percent, according to Trace, the bond price reporting system of the NASD.

Cutting out some more fat will please investors a bit.

S.