UAW Core Strategy Changes
Tentative GM Contract Reveals a New Formula Designed to Save
By Jeffrey McCracken and Terry Kosdrosky
The Wall Street Journal
Saturday, September 29, 2007
As details of the United Auto Workers' tentative contract
agreement with General Motors Corp. become public, it is
becoming clear the deal marks a shift in the union's longtime
core strategy for protecting jobs.
WSJ's Neal Boudette takes a look at two of the militant groups
that think their union leadership is selling out to General
Under the contract, which cleared its first ratification test
Friday, the union is trading away company-provided retiree
health care and a long-standing insistence on equal pay for all
workers in return for GM commitments to invest in UAW plants and
put up $29.9 billion for a new health care trust.
Furthermore, under the proposed pact, the UAW will find itself
more concerned than ever with GM's stock price. Some $4.37
billion of the retiree health-care fund will come in the form of
a convertible note tied to GM's stock price.
In return, the UAW believes it has come up with a better formula
for saving jobs. Under the deal, GM has made
multibillion-dollar commitments to keep building specific cars,
trucks, engines and numerous plants across the U.S. Among the
investments listed in UAW contract documents: a plan to put a
new battery-operated car in a Detroit plant, build a roadster in
a Kentucky factory and revamp the company's big pick-up trucks
to keep plants in Wisconsin, Michigan and Indiana humming after
The 456-page UAW-GM agreement lays out a profound strategic
transformation within the UAW, led by its president Ron
Gettelfinger, a southern Indiana native and former Ford chassis
Instead of trying to block GM from sending jobs overseas or
eliminating them, Mr. Gettelfinger's contract uses inducements
such as a significantly lower starting wage for new hires and
certain support and subassembly workers to persuade GM to retain
and perhaps even create more UAW positions.
It falls now on Mr. Gettelfinger to persuade 73,000 UAW-GM
members over the next week that this fundamental shift is what
the union must do -- and get them to vote yes on the deal.
• New Deal: Local UAW leaders backed a tentative
contract with GM that represents a significant departure from
the union's old strategy for saving jobs.
• The Trade-Off: The UAW is accepting lower wages for
some workers along with an end to company-provided retiree
health care. In return, GM has detailed commitments to product
investments for 16 UAW factories.
• What's Next: UAW President Ron Gettelfinger must win
ratification from members at GM and then negotiate similar deals
at Ford and Chrysler.
That process started well for Mr. Gettelfinger on Friday, the
first day he began disclosing details of the contract to the
rest of his union. UAW membership, now numbered at about
520,000, once topped 1.5 million.
Local UAW-GM plant presidents and chairpersons gave the
tentative agreement unanimous support on Friday. Several of
them interviewed after the vote noted the commitments in the
UAW-GM contract for specific products in specific years for
Eldon Renaud, president of UAW local 2164 in Bowling Green, Ky.,
said he understands the realities confronting the domestic auto
industry and agrees that the union basically traded health-care
and wage concessions for job security and future plant
investments. "I really think that they had a lot of balls to
juggle," he said. "I feel like it's just a much better contract
than I thought there might be -- I thought there might be
changes we just couldn't live with."
Mr. Gettelfinger said during a news conference after the vote
that a show of support from local leaders "gives us a pretty
good indication" that the tentative agreement will be accepted
nationwide. He said he hopes to conclude rank-and-file voting
by Oct. 10.
The union-run trust, known as a Voluntary Employees' Beneficiary
Association, or a VEBA, has been the focus of these talks and
likely will be the issue Mr. Gettelfinger and the UAW plant
leaders will have to work on the most as they sell the agreement
UAW opponents of the VEBA already have begun a campaign online
and in person urging members to vote against the contract
because of the VEBA. "I'm not concerned about that at all,"
said Mr. Gettelfinger.
According to UAW highlights of the deal, GM will put in added
payments of as much as $165 million over the next 20 years, with
the entire safety net not exceeding $1.6 billion if health-care
costs rise faster than expected.
Active workers will play a role in funding the VEBA, as they
will forgo certain cost-of-living-adjustment promises they might
otherwise have received.
According to the document distributed Friday, the VEBA will
include a $4.37 billion convertible note. The note is a
mechanism that's designed to be a windfall for the VEBA in the
event of a GM stock price increase. If the conversion is not
triggered, it essentially works like a standard bond.
GM shares moved higher Friday afternoon as the terms of the deal
were announced. The stock was quoted at $36.70, up 24 cents, in
4 p.m. composite trading on the New York Stock Exchange.
The agreement reached Wednesday ended a two-day strike by the
UAW against GM and raised hopes that the largest U.S. auto maker
will be able to bring its cost structure more in line with that
of its Asian competitors.
GM has made binding product investment commitments to the UAW at
16 union-represented plants in the U.S., including moving future
vehicle production to some sites that were considered to be
GM will offer $3,000 signing bonuses to workers and lump-sum
payments in coming years under terms of the new contract. The
lump sums will be equivalent to 3%, 4%, and 3% of pay
respectively between 2008 and 2010.
One of the more anticipated subjects of the contract could be a
second-tier wage the UAW has agreed to create for so-called new
hires in nonproduction jobs. The UAW has agreed to allow GM to
pay these people $14 to $16.23 an hour under this agreement, and
GM will establish portable 401(k) benefit packages for these
The establishment of a lower wage and 401(k) represents a
substantial concession for a union that has typically fought for
nearly gold-plated benefits and relatively high wages for
GM will contribute $1 per compensated hour to the 401(k) plans,
and will offer a cash-balance defined benefit plan for new
hires. The company will also establish a new health-care plan
for new hires.
The deal also includes a change to the Jobs Bank, which pays
workers much of their pay and benefits while on layoff. Mr.
Gettelfinger said there was a time restriction on how long
people can stay in the bank, but that the program will continue.
--Mike Spector and John D. Stoll
contributed to this article.
Write to Jeffrey McCracken at
email@example.com and Terry Kosdrosky