The James Logan Courier

By Rick Popely
Chicago Tribune (MCT)

DETROIT — The United Auto Workers union reached agreement early Wednesday on a historic four-year contract with General Motors Corp., ending a two-day strike and shifting a $51 billion liability for retiree health care to a union-run trust fund.

GM shares rose as much as 7 percent on the news Wednesday morning, on the New York Stock Exchange.

GM has carried that liability, but the UAW will now manage it in a voluntary employee beneficiary association, or VEBA, assuming future risks of rising health-care costs.

Details of the contract weren't released, but sources familiar with the terms said it includes lump-sum bonuses instead of annual wage increases, assurances that GM will preserve UAW jobs at U.S. plants and lower pay for new hires and workers who perform non-production related jobs such as janitorial duty.


The VEBA trust fund will require court approval and regulatory approval by the Securities and Exchange Commission and could take several months to implement.

UAW President Ron Gettelfinger, speaking to reporters at union headquarters in Detroit after the tentative contract was announced, said he thought the strike helped bring the two sides to an agreement.

"We feel very good about this tentative agreement," Gettelfinger said, adding that the VEBA would secure retiree health-care benefits for "80 years" without divulging how it would be funded.

Gettelfinger called it "an agreement our members can live with" and said the VEBA fund would secure retiree health-care benefits for years.

GM Chairman and CEO Rick Wagoner said in a statement, "This agreement helps us close the fundamental competitive gaps that exist in our business. 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."

GM spokesman Tom Wickham said workers would return to GM's 83 plants and other facilities shut down by the strike for Wednesday afternoon's second shift, though it could take a few days to resume full production.

"There will be some gaps in the supply line because suppliers will have to ramp up their production again. The goal is to have everything up and running as soon as possible," Wickham said.

The UAW walked out of GM plants Monday, halting U.S. production at the largest domestic automaker and idling 73,000 workers, after the two sides stalled on key job security and wage issues following more than a week of intense negotiations. It was the first strike against GM by the UAW since 1998 and the first national strike against GM since 1970.

The tentative contract, which has to be ratified by UAW workers, was reached 12 days after the previous contract expired. Leaders of GM local unions will be briefed on the agreement at meetings in Detroit later this week, and workers could vote on it as early as this weekend.

The union made job security a priority because it has lost 150,000 jobs at GM since 1997. Retiree health care was a core issue for GM because it adds about $950 to the cost of every U.S. vehicle it builds. GM has about 340,000 retired union workers and surviving spouses receiving health-care benefits.

With the agreement on retiree health care the UAW, traditionally one of the country's most powerful unions, gives ground in a fundamental way: The union takes over responsibility for managing its own members' medical benefits. It was unclear Wednesday whether GM had committed to supporting the fund if it ran out of money, a key concern of workers who feared their benefits would no longer be guaranteed.

GM is the first of the three domestic automakers to come to terms with the UAW. The contracts with Ford and Chrysler also expired Sept. 14, but the union agreed to extend their contracts while it bargained with GM.

The UAW will select Ford or Chrysler as its next negotiating target, and if the union follows traditional practice, the first contract will set the pattern for the others. Narrowing an estimated $1,400-per-vehicle cost gap versus the U.S. operations of Toyota will give GM, Ford Motor Co. and Chrysler LLC a better shot at competing on the showroom floor and is critical to their future.

Settling with GM is only the first hurdle for the UAW. Now it has to sell the contract to members who lost pay while on strike and are leery of giving up company-guaranteed retiree health-care benefits. A vocal group of dissident UAW members has campaigned against the retiree health-care plan and the notion they have to give up hard-earned benefits that took decades — and several strikes — to build up.

Gettelfinger, however, was caught between a rock and a hard place because if the union didn't help GM lower labor costs, GM would shift more jobs to Mexico, Canada and other countries where it could build vehicles for less.

Industry analysts said the UAW's best option was to make a deal on wage increases and retiree health care in exchange for promises that workers will have jobs, at least for the short term.

(c) 2007, Chicago Tribune.
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