The Association of U S West Retirees



UAW Core Strategy Changes
Tentative GM Contract Reveals a New Formula Designed to Save Jobs
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 Motors.

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 2012.

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 repairman.

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 specific plants.

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 to members.

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 endangered.

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 people.

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 workers.

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 and Terry Kosdrosky