GM still at table
Union balking at taking on retiree health costs, observers say
By Tom Krisher, Associated Press
St Paul Pioneer Press
Friday, September 21, 2007
DETROIT - Negotiators for General Motors Corp. and the United
Auto Workers, trying to craft a new contract, are still
discussing the automaker's proposal to pay the union to form a
trust and take over the company's huge retiree health care
obligation, according to two people who have been briefed on the
The people, who spoke on condition of anonymity because the
talks are private, said noneconomic issues, which include
grievance procedures, absenteeism and other items, had been
The discussions about the trust took place even though UAW
President Ron Gettelfinger on Tuesday rejected a GM offer on the
trust, called a Voluntary Employees Beneficiary Association, or
VEBA, according to one of the people briefed on the talks.
"I can tell you it's being worked on," the person said Thursday.
GM, which has been picked by the union as the lead company and
potential strike target in this year's bargaining, badly wants
the UAW to agree to the trust. Whatever agreement is reached
with GM likely would be used as a pattern for the other two
Detroit automakers, Ford Motor Co. and Chrysler LLC.
Both people who had been briefed on the talks said all economic
issues including pay, work rules, job security promises and
health care contributions are contingent on whether a VEBA is
agreed to, so the negotiations have been slowed.
The UAW is seeking to trade taking on the trust for pledges from
GM that it will build new vehicles in U.S. factories, the people
said. Deutsche Bank analyst Rod Lache said in a note to
investors Thursday that the union has agreed to the concept of a
VEBA but so far doesn't like the company's terms.
"The UAW knows that GM cannot sign a contract that excludes a
VEBA deal at this point and that they cannot accept the
consequences of an uncompetitive cost structure either," Lache
wrote. "Without a VEBA deal, GM has threatened to begin a much
more aggressive downsizing of its U.S. manufacturing base."
Lache wrote that GM knows it is risking a strike.
"It is our belief that the most likely outcome is that GM and
the UAW will reach a compromise and pursue a VEBA solution after
a few days of drama," he wrote.
Since the company and union are billions of dollars apart on how
much GM would pay into the trust, Gettelfinger wanted to talk
about other issues, one of the people said.
Now under discussion is a second offer from GM that doesn't
include the trust but has larger cost cuts, including up to a $5
drop in hourly wages, increased health care contributions, fewer
guarantees of new work at U.S. factories, reduced vacation time
and other items.
GM, as well as Ford and Chrysler, is trying to cut what it says
is about a $25 per hour labor cost gap with Japanese
competitors. Industry analysts say the costs must be reduced
for the U.S. companies to survive.
GM has about $51 billion in unfunded retiree health care
liabilities, and analysts have said it wants to pay the union
about 65 percent of the cost to form the trust. The union has
hired an outside consultant to study GM's proposal, the people
GM spokesman Tom Wickham and UAW spokesman Roger Kerson declined
to comment on the talks Thursday.