GM may demand big UAW givebacks

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 automakers.
"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 midnight tonight.
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's strategy.
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 $34.47.
'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 derail.
"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.'"
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