What's taking so long? High-stakes health plan

What's taking so long? High-stakes health plan http://www.freep.com/apps/pbcs.dll/article?AID=/20070918/BUSINESS01/709180386/1014
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 LLC.
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 bonuses.
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 projected.
"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 the talks.
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.

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