- The Washington Times - Thursday, September 27, 2007

General Motors and the United Auto Workers reached a tentative contract agreement yesterday, suspending a two-day strike and possibly setting the pattern for agreements with the other two major U.S. car manufacturers.

The deal, which will help GM narrow the cost gap with Asian competitors, includes an agreement to transfer administration of retiree health care to the union in exchange for job guarantees.

Details of the deal were withheld pending union ratification. Voting is expected to begin this weekend, UAW President Ron Gettelfinger said. If members vote against the agreement, they could go back on strike, but Mr. Gettelfinger said he was confident it will be ratified. The deal must also be approved by courts and federal regulators.

The agreement is likely to be a template for “pattern bargaining” with Ford Motor Corp. and Chrysler LLC, said Laurie Harbour-Felax, a Farmington Hills, Mich., automotive consultant.

GM resumed production yesterday after the strike by more than 73,000 UAW members, who walked out of 80 plants after contract talks broke down over job security and health care issues. It was the autoworkers’ first national strike in more than 30 years.

While the retiree health care provision will require a massive cash infusion, it will take a $51 billion liability off GM’s books and allow it to dramatically reduce its labor costs, analysts said.

Deutsche Bank auto analyst Rod Lache said the agreement to move retiree health care costs off GM’s books could eventually reduce its labor-cost gap with Asian automakers by $18 an hour. GM has 340,000 hourly retirees and spouses.

GM would pay about 70 percent of its obligation, or nearly $36 billion, into the trust, called a Voluntary Employees Beneficiary Association (VEBA).

The UAW reportedly won commitments from GM to invest in U.S. plants and to hire thousands of temporary workers, which will boost UAW membership.

The deal is also said to give GM the right to pay significantly lower wages for some new hires and to offer early retirement bonuses to older workers to help clear the way for them.

It also reportedly freezes wages and includes a cash bonus instead of cost-of-living wage increases.

Wall Street applauded news of the deal, sending GM shares up $3.22. or almost 10 percent, to close at $37.64 on the New York Stock Exchange.

“We really see this as revolutionary,” Michael Robinet, an analyst with CSM Worldwide Inc. of Northville, Mich., told Agence France-Presse. “They were able to really change the way they do business with each other.”

Union officials praised the contract and said VEBA will protect retirees and be sufficiently funded to pay benefits for the next 80 years.

“We feel very good about this agreement,” Mr. Gettelfinger told reporters shortly after the deal was reached at 3:05 a.m. “I think this strike helped our side.”

Mr. Gettelfinger predicted GM’s employment level should remain constant over the four-year term of the contract.

“There’s no question this was one of the most complex and difficult bargaining sessions in the history of the GM-UAW relationship,” said GM Chairman Rick Wagoner.

“This agreement helps us close the fundamental competitive gaps that exist in our business,” Mr. Wagoner said. “The projected competitive improvements in this agreement will allow us to maintain a strong manufacturing presence in the United States along with significant future investments.”

This article is based in part on wire service reports.

Copyright © 2018 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.


Click to Read More and View Comments

Click to Hide