The Case of the 2006 Auto Assembly Industry Special Attrition Program

Abstract

In response to declining demand for the vehicles produced by General Motors (GM) and Ford, the United Auto Workers (UAW) and GM and Ford, along with Delphi and Automotive Components Holdings (ACH), the parts suppliers that had been spun off from GM and Ford, agreed in 2006 via collective bargaining to “special attrition programs” (SAP) consisting of early retirement incentives or “buyouts” as well as payments to encourage voluntary separation. These incentives, which ranged from $35,000 to $140,000, were accepted by approximately 35,000 of 110,000 GM hourly workers, 38,000 of 80,000 Ford and ACH hourly workers, and 12,600 of 24,000 Delphi hourly workers, all terminations to be effective by the end of 2006 (Ford Motor Co. 2006, General Motors 2006). Thus, by early 2007, the hourly workforces of GM, Ford/ACH, and Delphi had been reduced by approximately 85,500 employees.1,2This paper estimates the effect of this collectively bargained attrition program on the Michigan economy. In essence, the attrition payments to hourly workers, who are disproportionately located in Michigan, created an infusion of cash into the Michigan economy. As workers spent this money, it induced economic activity in other industries. We attempt to estimate the magnitude of the inducements, or “multiplier effects,” using an input–output model.