Print

Email story

Comment

Letter to the editor

GM deal sets stage for others

Ford and Chrysler can build on the agreement.

DETROIT - GM's tentative new contract with the United Auto Workers, reached at about 3 a.m. Wednesday after the union's two-day strike, offers the other struggling domestic automakers, Ford and Chrysler, enough cost-cutting inducements to find common ground and strike a deal with the union, analysts said.

"You can do some specific things for them and still work within the framework of this contract," said David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich. "I don't believe that the union would have negotiated that if they did not believe it was viable for Ford and Chrysler."

GM and the UAW agreed to a deal that allows GM to move its unfunded retiree health care costs into an independent trust administered by the UAW. The union agreed to lower wages for some workers. Wall Street applauded news of the deal, sending GM shares up $3.22, or 9.4 percent, to close at $37.64.

In exchange, the UAW won bonuses, an agreement from GM to hire thousands of temporary workers and commitments to invest in U.S. plants, according to a person who was briefed on the contract who requested anonymity because the contract details haven't been released.

The contract must be reviewed by local UAW presidents and will then be subject to a vote of GM's 74,000 rank-and-file members. The four-year agreement is expected to set a pattern for contracts that will be negotiated at Ford Motor Co. and Chrysler LLC.

Ross Eisenbrey, vice president of Washington's Economic Policy Institute, said the shift in retiree health care obligation into the UAW-run Voluntary Employees Beneficiary Association, or VEBA, is more important to GM than its Detroit rivals. He said the automaker carries roughly 3 1/2 retired workers for every one active worker, while Ford has 1 1/2 retired workers for every active worker. Chrysler's ratio is lower.

Of greater interest to Ford and Chrysler, he said, is the two-tiered wage structure, though both elements of the deal clearly serve the automakers' goal of cutting costs. All three lost money last year and their combined share of the U.S. market has plunged from 73 percent in 1996 to 54 percent last year.

"The union agreed to reduce the overall labor costs significantly, so that will be a help to both Ford and Chrysler," Eisenbrey said. "They'll want to get reductions that are in line with what GM gave."

Marcey Evans of Ford said Ford is pleased that GM and the UAW were able to tentatively agree but would not comment what it might mean for Ford.

Michele Tinson of Chrysler said the company is awaiting word from the UAW on when bargaining will begin.

In exchange for their ratification, GM workers would get a one-time bonus of $3,000 and then bonuses of 3 percent, 4 percent and 3 percent of their annual pay each year for the last three years of the contract, said one of the people briefed on the deal.

That's equally attractive to Ford and Chrysler, said Greg Gardner, an analyst with Troy-based Harbour Consulting.

"Given the conditions ... I'm sure they'll push for certain customized elements, but the fact that there is an agreement with GM is definitely a very positive development for all three companies," he said.

FAST FACTS

Contract conditions

GM and the UAW agreed to a deal that calls for:

- The transfer of GM's $51-billion retiree health care liability to an independent trust administered by the UAW

- Commitments for future investment in U.S. plants

- A plan to make thousands of temporary workers full-time employees

- Bonuses and lump-sum payments for workers

What's next

The tentative contract will be presented to local union leaders this week, and the local leaders will start showing the contract to their members over the weekend. The contract must be ratified by a majority of GM's UAW members.

[Last modified September 26, 2007, 23:44:45]