GM-UAW pact may be framework for rivals

THURSDAY, SEPT. 27, 2007

DETROIT — GM’s tentative new contract with the United Auto Workers offers the other struggling domestic automakers, Ford and Chrysler, enough cost cutting inducements to find common ground and strike a deal with the union, analysts said Wednesday.

“You can do some specific things for them and still work within the framework of this contract,” said David Cole, chairman of the Center for Automotive Research in Ann Arbor. “I don’t believe that the union would have negotiated that if they did not believe it was viable for Ford and Chrysler.

“They couldn’t hang Ford and Chrysler on this contract.”

GM and the UAW agreed Wednesday to a deal 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 bonuses, an agreement from GM to hire thousands of temporary workers and commitments to invest in U.S. plants, according to a person who was briefed on the contract. The person requested anonymity because the contract details haven’t been publicly released.

The contract must be reviewed by local UAW presidents and will then be subject to a vote of GM’s 74,000 rank-and-file members. The agreement is expected to set a pattern for contracts that now will be negotiated at Ford Motor Co. and Chrysler LLC.

Ross Eisenbrey, vice president of the Washington, D.C.-based Economic Policy Institute, said the shift in retiree health care obligation into the UAW-run Voluntary Employees Beneficiary Association, or VEBA, is more important to GM than its Detroit rivals. He said the automaker carries roughly 3 1/2 retired workers for every one active worker, while Ford has 1 1/2 retired workers for every active worker. Chrysler’s ratio is even lower.

Of greater interest to Ford and Chrysler, he said, is the two-tiered wage structure, though both elements of the deal clearly serve the automakers’ overall goal of cutting costs. All three lost money last year and their combined share of the U.S. market has plunged from 73 percent in 1996 to 54 percent last year.

In a recent research note, Bear Stearns analyst Peter Nesvold said Ford may benefit more from a retiree health care deal than GM. Part of the reason is that Ford’s cash flow has exceeded expectations in recent quarters and should get an additional cash boost from potential sales of its Jaguar, Land Rover and Volvo brands.


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