The Association of U S West Retirees



GM, UAW Reach Tentative Agreement
Framework Gives Company More Hiring Flexibility, Creates Health-Care Fund
By Joseph B. White, John D. Stoll and Jeffrey McCracken, Staff Reporters
The Wall Street Journal
Wednesday, September 26, 2007

DETROIT --  General Motors Corp. and the United Auto Workers early Wednesday morning announced a tentative agreement on a new national contract for about 74,000 U.S. auto workers that includes a historic restructuring of GM's obligations for UAW retiree health care.  The deal was announced at about 4 a.m. in Detroit after a two day national strike by the UAW against GM.

Details of the contract weren't disclosed.  GM said the tentative contract "paves the way for GM to significantly improve its manufacturing competitiveness, providing the basis for maintaining and strengthening its core manufacturing base in the United States." 

Under the framework taking shape late Tuesday, it was expected that GM would give the UAW commitments for substantial investment in plants in the U.S. -- many of those tied to new cars, trucks, engines and transmissions the company has on the drawing board, according to people familiar with the process.

"This agreement helps us close the fundamental competitive gaps that exist in our business," Mr. Wagoner said in a statement.  "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."

The creation of an independent trust to take over some $50 billion owed to GM-UAW retirees for health care would represent a significant boost for GM, which has had its credit ratings knocked down to junk ratings in part because of concerns about the huge debt, which is more than double GM's current market capitalization.

GM has an estimated $51 billion retiree health-care obligation to UAW members and retirees.  At 70 cents on the dollar, the fund would be worth in excess of $35 billion.

Among the other key elements of the new deal that took shape late Tuesday were substantial changes to the much-maligned Jobs Bank, a job-security provision that allowed unemployed UAW members to receive full pay for years without working.  The provision will still exist, but changed to make it much less likely there will be many people in the Jobs Bank for any length of time, according to people familiar with the process.

Other elements, as of late Tuesday night, included:  a new-hire rates for new UAW members brought into GM.  The rate would probably be far less -- maybe even half -- the current wage-and-compensation package given to UAW-GM members, said these people.

However, 4000-5000 temporary workers at GM would be hired in as full-time workers and paid at the full, tier-one wage-and-compensation rate that is estimated at $70-$75 an hour once wages, benefits and pensions are included.  To make room for new hires, GM would again offer substantial early-retirement buyouts for workers.

Getting these temp workers hired as full-time GM employees at the compensation rate was a top priority for the UAW, which has added few members at the Big Three and was seen as a graying union.

GM would be able to negotiate a diversion on cost-of-living adjustments and increased cost-sharing on health care for active workers.  Another potentially big gain for GM if the deal is approved:  no wage increases during the life of the contract.

There will likely be a signing bonus for workers, plus lump-sum bonuses of 3 percent, 4% and 3% of annual pay over the last three years of the deal, people familiar with the process said late Tuesday.  It wasn't clear early Wednesday if any of these provisions had been altered in last minute bargaining.

Earlier Tuesday, Mr. Gettelfinger stepped up public pressure on GM to improve its offers on job security and profit sharing with union workers.  Meanwhile, people familiar with the matter said the issues remaining to be resolved included what UAW's members can expect to get if GM regains financial success thanks to UAW concessions.

Despite the strike's disruption, the auto maker's shares weakened only slightly.  In 4 p.m. New York Stock Exchange composite trading, GM's shares were down 0.9% to $34.42.  Investors and analysts were betting that more than 73,000 striking auto workers will shortly return to the assembly lines.

The two sides have been holding marathon sessions since Sept. 13.  But the strike, and a series of public statements by Mr. Gettelfinger, have made it clear that for much of that time GM and UAW leaders were miscalculating the resolve of their counterparts.

A GM spokeswoman said the auto maker is not giving details about the tentative agreement at this time, instead allowing the UAW to take the lead on communicating with its members.

"I'm pleased to say that we have a VEBA in place that will secure the benefits of our retirees," UAW President Ron Gettelfinger said at an early morning news conference inside the union's Detroit headquarters.

Mr. Gettelfinger said he's confident of ratification and that voting likely will start as soon as this weekend.  Union leaders will be briefed on Thursday and Friday, he said.

The UAW also expects to decide Thursday what auto maker it will negotiate with next.

--The Associated Press contributed to this article.

Write to Joseph B. White at, John D. Stoll at and Jeffrey McCracken at