GM UAW Labor Savings Said Double Ford’s $ 500 Million Agreement

GM UAW Labor Savings Said Double Ford’s $500 Million Agreement http://tinyurl.com/aqhjrf
March 11 (Bloomberg) -- General Motors Corp., trying to keep U.S. aid
it needs to survive, expects more than double the $500 million savings Ford Motor Co. said it gets with labor changes approved this week, people familiar with the details said.
United Auto Workers union leaders reached a tentative agreement on contract changes for GM on Feb. 17 covering 62,000 workers and are still negotiating on a retiree health-care fund. GM’s savings are bigger than Ford’s in part because of additional work rule changes, the people said, who asked not to be identified because the GM details haven’t been released.
GM needs labor and debt holder concessions of more than $28.5 billion as part of an agreement with the U.S. Treasury to keep $13.4 billion in loans. GM is also trying to convince President Barack Obama’s auto task force to free up as much as $16.6 billion more to keep the largest U.S. automaker out of bankruptcy.
Ford, which is not seeking U.S. aid, said today that a new labor agreement and modifications to a Voluntary Employee Beneficiary Association union retiree health-care fund will save $500 million annualized, with about 75 percent of that realized this year. The estimate of GM savings includes only the contract concessions and doesn’t include any changes to the VEBA, the people said.
“GM has already said we have achieved substantial savings in our labor agreement but we are not giving details,” GM spokeswoman Renee Rashid-Merem said. UAW spokesman Roger Kerson didn’t immediately return a phone call seeking comment.
Similar Agreements
The UAW-GM agreement makes similar economic concessions to the one ratified by union members at Ford, UAW Vice President Cal Rapson wrote in a March 9 letter to local presidents and chairmen. The union won’t set a vote to ratify the agreement, or give details, until after the VEBA agreement is set, Rapson said in the letter.
The new Ford agreement will trim labor and benefit costs to $55 an hour from $60, Hinrichs said. Ford’s labor costs may fall to $50 an hour by 2011, if the car market improves, spokesman Mark Truby said.
Toyota’s comparable U.S. labor costs are about $48 or $49 an hour, Hinrichs said, adding that Ford will reach parity with the U.S. plants of European and Asian carmakers by 2011 as savings from concessions are fully realized.
GM said in its Feb. 17 report to the U.S. Treasury that it aims to reach labor-cost parity this year.
Changes to the GM contract “in the area of economics, pattern the UAW Ford agreement,” Rapson said in the letter. Other parts, he said, are “drastically different.”
For example, there are no mandatory physical examinations and “other parts of the agreement are different to better fit GM culture.”
Concessions Needed
GM must persuade the UAW to swap $20.4 billion in future obligations to the VEBA for half that in cash and the rest in equity as part of U.S. Treasury requirements. GM has said it needs at least $2 billion in fresh aid by the end of this month or it will be bankrupt.
The UAW walked out of GM talks on Feb. 13 in a dispute over the VEBA demands and later returned to approve only other concessions. GM UAW members must still ratify the agreement for it to be implemented.
GM needs labor concessions in part to win an agreement from bondholders to exchange about $27.5 billion in existing debt for $9.2 billion and new GM equity. The bondholders are still negotiating that demand.
GM’s bondholders meet with Obama’s auto committee March 5. The bondholders’ representatives are concerned GM’s viability plan may not keep it out of bankruptcy, a person familiar with the matter said last week.
The Ford contract changes won the support of 59 percent of production workers and 58 percent of skilled-trades employees, the union said March 9 in a statement. About 42,000 members were eligible to vote on the contract. The terms include elimination of annual bonuses and cost-of-living pay increases, as well as reductions in layoff benefits and in the company’s cash contribution to the VEBA.
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