The agreement to move retiree health care responsibility to the
union may be repeated at Chrysler and Ford.
By Dee-Ann Durbin and Tom Krisher, Associated Press
Minneapolis Star Tribune
Thursday, September 27, 2007
DETROIT - General Motors Corp. won its struggle to unload $51
billion in retiree health costs and improve competitiveness in
the latest round of contract talks with the United Auto Workers
(UAW), but not without a short-lived strike that wrung promises
out of GM to keep jobs at U.S. plants. The two sides tentatively
agreed Wednesday to a groundbreaking agreement that allows GM to
move its unfunded retiree health care costs into an independent
trust administered by the UAW. The union also agreed to lower
wages for some workers. In exchange, the UAW won commitments
from GM to invest in U.S. plants, bonuses and an agreement to
hire thousands of temporary workers who will boost UAW
membership, according to a person who was briefed on the
contract. The person requested anonymity because the details
haven't been publicly released.
Wall Street applauded news of the deal, sending GM shares up
more than 9 percent.
The union said the agreement with the nation's largest automaker
was reached shortly after 3 a.m. The UAW canceled its two-day
strike about an hour later and workers were back in GM's 80 U.S.
facilities Wednesday afternoon. GM lost production of around
25,000 vehicles because of the strike, according to CSM
Worldwide Inc. Analysts had suggested a short strike could
actually improve GM's outlook because it would reduce inventory.
GM shares rose $3.22, or 9.4 percent, to $37.64. Standard &
Poor's Ratings Services said it might raise GM's long-term debt
rating, now below investment grade.
"We view the tentative agreement and its apparent terms as a
historic milestone toward the long-term improvement in
fundamentals and survival at the North American automakers,"
KeyBanc analyst Brett Hoselton wrote in a note to investors.
The agreement is expected to set a pattern for contracts to be
negotiated at Ford and Chrysler. UAW President Ron Gettelfinger
said he will decide this week which automaker will be next. The
UAW even may negotiate with Ford and Chrysler simultaneously, he
said during a radio interview.
The GM contract will be reviewed by local UAW presidents this
week. Voting by GM's 74,000 members is expected to begin this
weekend, Gettelfinger said. If members vote against the
agreement they could resume striking, but Gettelfinger said he's
confident of ratification.
"We're very comfortable with this agreement and we're happy to
be able to recommend it to our membership," he said.
Tom Brune, who works at a GM plant in Wentzville, Mo., said he
was happy to go back to work.
"There is a lot of relief, but that's coupled with anxiety to
see details of the agreement," Brune said as he stood near a
pile of strike placards at UAW Local 2250.
GM and the UAW said the tentative contract includes the health
care trust but said they wouldn't release more details until the
contract is ratified.
GM said the contract will make it significantly more
competitive. The company, which lost $2 billion last year and is
in the midst of a restructuring, went into the negotiations
seeking to cut or erase what it said is about a $25-per-hour
labor cost disparity with the U.S. employees of Japanese
competitors. GM has said it pays workers $73.26 an hour in wages
"This agreement helps us close the fundamental competitive gaps
that exist in our business," Chairman and Chief Executive Rick
Wagoner said. "There's no question this was one of the most
complex and difficult bargaining sessions in the history of the
Deutsche Bank auto analyst Rod Lache said the agreement to move
retiree health care costs off GM's books could eventually reduce
the labor cost gap by $18 an hour. GM would pay about 70 percent
of its obligation, or nearly $36 billion, into the trust, called
a Voluntary Employees Beneficiary Association, or VEBA,
according to a person briefed on the contract who asked not to
be identified because contract details aren't yet public.
Contract includes bonuses
In exchange for their ratification, union members would get a
one-time bonus of $3,000 and then bonuses of 3 percent, 4
percent and 3 percent of their annual pay each year for the last
three years of the contract, said one of the people briefed on
GM also committed to future investments in U.S. plants, the
person said. Gettelfinger said job security was the major issue
causing the strike, but he wouldn't say Wednesday whether GM has
promised specific future products to U.S. factories.
The pact also includes a lower wage structure for newly hired
workers in certain non-manufacturing jobs such as sanitation
workers, that person said. Hoselton said that agreement paves
the way for a two-tier wage structure throughout the company and
industry, something the automakers have been seeking.