GM may demand big UAW givebacks
General Motors Corp. and the United Auto Workers were locked in a tense
standoff Thursday after UAW President Ron Gettelfinger rejected a major
GM proposal to create a health care trust for retirees.
The dramatic deadlock opens the door for GM to seek harsh concessions
from the UAW that include a wage cut of at least $5 an hour, higher
medical co-payments for workers and possible plant closings.
People close to the talks said the slow but steady negotiations faltered
after Gettelfinger rejected GM's latest proposal to fund a union-run
trust to cover $50 billion in health care obligations for 340,000
retirees and family members.
Gettelfinger took the trust proposal off the table Tuesday, and
negotiators were unable to revive the issue Wednesday, according to
people familiar with the situation.
While bargaining teams met on some issues Thursday -- the sixth day of
talks after the current contract expired Sept. 14 -- there was no
significant movement on the core issue of health care costs.
Negotiations were continuing near midnight.
There was no official comment Thursday from GM or the UAW about the
talks. But people close to the negotiations said that without a deal on
health care, GM will seek wrenching cuts on wages, benefits and jobs to
close an estimated $25-to-$30-per-hour gap on labor costs with Japanese
"I think we're stepping up to real hardball here," said David Cole,
chairman of the Center for Automotive Research in Ann Arbor. "GM is
going to address the competitive gap one way or the other."
One labor expert said the UAW is equally determined to make sure any
proposed trust is properly funded and that retiree health care is
protected long-term. "The issue, to the company, was perhaps several
billion dollars," said Harley Shaiken, a labor professor at the
University of California, Berkeley. "But to the union, it's the security
of health care in the future."
The standoff over the health care trust -- known as a Voluntary
Employees' Beneficiary Association, or VEBA -- also could prompt the UAW
to impose a strike deadline for the prolonged negotiations.
Strike is possible
Officials of three UAW locals were told Thursday by members of the
union's national bargaining team that a strike was still possible.
The local officials, who spoke on condition of anonymity, were told to
"be prepared for something" if no progress was made in the bargaining by
People close to the talks said Thursday that despite Gettelfinger's
rejection of the latest VEBA proposal, the issue will likely be
revisited in coming days. The deadlock is said to center on the level of
funding GM would put in the trust.
Without an agreement to offload health care costs onto a union-run
trust, GM is expected to push an alternative agenda of deep cost cuts
that directly impact its 73,000 U.S. hourly workers.
Those demands include a cut of at least $5 in the current average
assembly plant wage of $27.81 an hour, according to people familiar with
GM is also expected to ask for higher medical co-pays for active workers
and retirees, and revisions in pensions. The automaker also could pull
back on investing in new products for its U.S. plants and move the work
to Mexico or overseas.
Meanwhile, financial analysts for GM and the UAW continued to study the
VEBA on Thursday and bargaining teams have reached agreement on some
noneconomic issues in recent days, sources close to the talks said.
GM stock dropped for the second straight day Thursday following a surge
late last week. Shares were down 51 cents, or 1.5 percent, to close at
'It's only going to get worse'
The tough stance by GM underscores the pressure to slash costs facing
all Detroit automakers.
The UAW picked GM last week as the lead company to negotiate a
pattern-setting contract for the domestic automakers, with Ford Motor
Co. and Chrysler LLC awaiting the outcome of the talks.
But if the union can't cut a deal at GM, it's unlikely that
cash-strapped Ford or newly private Chrysler will offer a better one.
"Ron Gettelfinger is in as tough a negotiating position as you could
imagine," Cole said. "What's he going to do? Go to Ford or Chrysler?
It's only going to get worse."
The constant focus on VEBA from GM and Wall Street -- and an assumption
by many that a trust was all but a done deal -- has been a sore spot for
Gettelfinger and the UAW, sources familiar with the situation said.
Gettelfinger has tried to drive home the mantra that the union won't
offer up givebacks despite the automakers' financial turmoil. He's vowed
to safeguard retirees and fight to stem the flow of U.S. factory jobs
overseas and to nonunion workers.
If nothing else, the move to table VEBA talks forced discussion from
retiree health care for the first time since negotiations began in July.
It also gives the union an opportunity to show members it's fighting for
jobs -- the chief concern of the rank and file.
The deep cuts in GM's alternate offer give the UAW a glimpse of what
could be in store if the VEBA gets tossed out. But, in the end, it also
may help UAW leaders sell reluctant members on a VEBA deal.
"All the attention was focused on the principle of the VEBA and once
that was agreed to, everyone forgot the funding was as important as the
principle," said Shaiken, of UC Berkeley. "That caused negotiations to
"There was a lot of enthusiasm on Wall Street for a VEBA quickly," he
added, "and a lot of concern in the plants about, 'Look, we want to make
sure there are some jobs here after these negotiations.'"