What's taking so long? High-stakes health plan
While leaders of the UAW and General Motors Corp. may essentially agree
on the solution to long-term health costs, a contract agreement remained
elusive through Monday evening.
Analysts and workers say the reasons are threefold:
• It's extremely complicated.
• The stakes are fantastically high.
• It is going to be difficult to get rank-and-file members to ratify it.
People briefed on the matter indicate the two sides are down to the
final multibillion-dollar decisions on matters such as establishing a
retiree health care trust -- known as a voluntary employee beneficiary
association, or VEBA -- and job-security issues, including commitments
for plant investments in the United States.
Before 10 p.m., GM spokeswoman Katie McBride said that Monday's talks
had concluded and the two sides plan to resume negotiations this morning.
A person close to the talks said that an agreement appeared to be at
least a day away, with significant work remaining. "I think they are
reasonably close," David Cole, chairman of the Center for Automotive
Research in Ann Arbor, said Monday.
On Thursday, the UAW picked GM as its lead negotiating partner and
so-called strike target, meaning the automaker could face a strike if
negotiations break down. But this is considered preferable to having to
work with a contract that is better suited to Ford Motor Co. or Chrysler
Cole said he thinks there is an agreement in principle and that the UAW
does not want to strike but that the dramatic changes at stake in the
new contract will be difficult to sell to the UAW rank-and-file.
"The one question is: How do you optimize this from the drama standpoint
to get the return?" Cole said. "This is not a conventional,
easy-to-ratify agreement that they are going to come up with."
Harley Shaiken, a labor expert from the University of
California-Berkeley, disagreed with the idea that concerns about
ratification are slowing down the talks.
The union leadership is focused simply on getting the best deal possible
for members, he said.
"The mood has clearly gone sour. ... A lot of the friction is whether or
not there will be adequate job guarantees coming out of this," Shaiken
said. "It has bogged down just by the time it has taken in a way that
both sides would have preferred to avoid."
People familiar with the talks say the parties are negotiating the size
of GM's retiree health care obligation, what percentage of that
obligation GM would pay into a trust, what assets it would use to
support the trust, over what period the company would contribute assets
and whether the automaker would provide further funding if health care
costs grew faster than expected.
They're also bargaining over what other commitments -- such as job
security and active worker benefits -- the company would grant in exchange.
In the end, it's not enough for both parties' leaders to agree: The UAW
must win approval from a majority of its members to ratify the contract.
"If they don't have something they can get ratified, this whole thing is
pretty academic," Cole said. "I think there is a lot of tension related
to that particular issue."
The new GM contract would cover about 73,000 active UAW members and
affect an additional 340,000 retirees and surviving spouses. It also
would likely be used as a guide for new contracts for UAW workers at
Chrysler and Ford, where talks continue, though on a more subdued scale.
The UAW chose to extend its contracts with Ford and Chrysler
indefinitely while it pursues a new deal with GM.
Either party can cancel the extensions with three days' notice.
The GM contract, on the other hand, is being extended hour-by-hour as
the parties work to reach a tentative agreement.
"The parties are still continuing to work on unresolved issues,"
according to a message posted by UAW Local 276 leadership.
Union members say they expect any agreement that includes the risky
proposition of the union taking responsibility for health costs and
possibly financing it with a stake in the company to come with larger
than usual signing bonuses for workers.
Rumors on plant floors run rampant, with hope of five-figure signing
One local leader said the negotiators also are bargaining for a cap on
active worker health-cost contributions and a provision through which GM
would contribute more to the VEBA if health costs rise higher than
"This is a new concept," Richard Block, a professor of labor relations
at Michigan State University, said of the VEBA. "It's an awful lot to do
in a short amount of time."
Many members say they expect a VEBA, whether they like it or not.
Union local leaders, briefed by UAW representatives in Detroit
throughout the weekend and again Monday, said they've been told to
expect GM to transfer the full load of its UAW retiree health costs --
worth an estimated $50 billion -- to a VEBA trust for which the union
would have oversight.
In exchange, they said, they expect a new contract to include specific
future U.S. production plans from GM and other job-security guarantees.
Those same leaders were told Sunday that the parties expected to reach a
tentative agreement or set a strike deadline by the end of the
negotiating session that day. But those same leaders heard no such
decision when the UAW and GM took a break from talks at 3 a.m. Monday or
when they resumed at 11 a.m. the same day.
The parties are working to create a new labor contract to replace the
one that was to expire Friday night.
Hourly workers returned to work Monday with no disruptions at any of the
automakers' 82 U.S. facilities, a spokesman said.
Top executives from the UAW and GM continued to be actively involved in
And GM Chief Executive Officer Rick Wagoner canceled an engagement to
participate in a panel on keeping America competitive in Washington,
D.C., today, opting to stay in Detroit "because negotiations are
ongoing," GM spokesman Tom Wilkinson said late Monday.
Still, throughout the day Monday, union members and local leaders said
they weren't hearing any official communications and hoped that was a
sign that the marathon talks continued to progress.
In the meantime, as the broader market slid Monday in anticipation of
the Fed meeting today, stock prices for GM and Ford rose on the hope of
big savings from a UAW contract.
GM closed at $35.23, up 2.95%, or $1.01 for the day.
Ford closed at $8.28, up 3.11%, or 25 cents for the day.