On this day in 2008, in an attempt to cut costs, struggling auto giant General Motors (GM) offers buyouts to all 74,000 of its hourly employees in the U.S. represented by the United Auto Workers (UAW) union. The move came after GM lost $38.7 billion in 2007, which at the time was the largest loss ever experienced by any car maker. (Two weeks later, on February 26, the loss was adjusted by $4.6 billion, to $43.3 billion.)
GM offered its employees a range of buyout options, including a $140,000 lump payment to those who worked at the company for at least 10 years and agreed to give up their health benefits and pension. GM's goal was to replace the employees who accepted buyouts with new workers brought in at a lower pay scale. At the time, a veteran GM worker (who belonged to the UAW) had an average base salary of $28.12 an hour, but once such benefits as health-care coverage and pension were added in, the cost to GM jumped to $78.21, according to a report by CNNMoney.com.
Some 19,000 GM workers ended up taking buyouts; however, the company's troubles were far from over, as gas prices reached record highs in the summer of 2008 and auto sales continued to slump amidst a growing global economic crisis. GM was criticized for focusing too heavily on its sport utility vehicles and small trucks and being slow to respond to an increasing consumer demand for smaller, more fuel-efficient vehicles. In December 2008, the federal government stepped in with a $13.4 billion loan to help keep GM afloat (Chrysler, the third-largest U.S. automaker, also received federal bailout funds). Also in 2008, Japan-based Toyota surpassed GM as the world's largest automaker, a title the American company, which was founded in 1908, had held since 1931. At its peak in the early 1960s, GM made more than half of all the cars and trucks purchased in the U.S.
In March 2009, President Barack Obama announced that in order to receive additional federal aid and avoid possible bankruptcy, both GM and Chrysler would be required to make deep concessions and develop radical restructuring plans. Additionally, GM's chief executive Rick Wagoner, who had held the top job since 2000, was forced to resign immediately. Nevertheless, on April 30, 2009, Chrysler filed for Chapter 11 bankruptcy and announced it would enter a partnership with Italian automaker Fiat. GM filed for bankruptcy a month later, on June 1.