The Association of U S West Retirees



Retiree precedent?
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 and benefits.

"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 GM-UAW relationship."

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 the contract.

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.