Special Report

UAW logo2007 UAW
Labor Talks

DETROIT – Production is expected to resume later today at General Motors Corp.’s 80 strikebound U.S. plants after the United Auto Workers union “recessed” its 2-day walkout by some 73,000 workers following the completion of contract talks.

GM lost an estimated 12,300 units of scheduled production per day during the shutdowns, Ward’s data shows. The auto maker has lost first-shift output today but hopes to get production running by the second shift, the company says.

“There’s no guarantee for all of the second shift,” a GM spokesman tells Ward’s. “We have to get (workers back) in the plants and get (the facilities) up and running. We also have to have parts in the pipeline. So it will take our suppliers some time to get running again.”

While there were no production losses in Mexico, which accounts for 2,000 units a day, the spokesman says output was lost in Canada at GM’s Oshawa, ON, plant No.1, which builds the Chevrolet Impala, and plant No.2 that makes the Buick LaCrosse. The two facilities build a combined 3,800 vehicles per day, according to Ward’s data.

Additionally, GM’s Windsor transmission plant halved two shifts and cancelled a third on Monday. Canadian union leaders warned earlier this week that up to 100,000 workers in the country could be laid off if the UAW walkout was a lengthy one.

When GM’s inventories appeared high in June, it was believed the company was stockpiling in preparation for a possible strike. But in reality, it was the result of poor sales.

Had the UAW walkout continued, supply of the auto maker’s hot new trio of cross/utility vehicles – the Buick Enclave, GMC Acadia and Saturn Outlook – would have been in jeopardy, with only 24 days’ supply of the popular Enclave on hand at the end of August, Ward’s data shows. Best-selling cars, the Impala, Pontiac G6 and Cobalt, also had dangerously low inventories.

Today’s tentative agreement sets up a Voluntary Employee Beneficiary Assn. (VEBA) that “for the next 80 years” will relieve GM of its health-care obligations to retirees and employees covered by its national agreement with the union, President Ron Gettelfinger says following an early-morning news conference at UAW headquarters here.

The VEBA, which still is subject to government regulatory approval, reportedly could have a total value of as much as $35 billion at start-up.

The deal also reportedly includes a lump-sum payout to union members in lieu of an annual pay increase, and may include a signing bonus for workers if they accept the contract.

Additionally, the tentative settlement, which will be subjected to the UAW’s ratification process beginning Thursday, addresses job-security concerns that fueled the union’s first national strike since 1976, and the first one at GM since 1970.

A “modified version” of the controversial Jobs Bank also is included, Gettelfinger says. The Jobs Bank supports laid-off workers by guaranteeing continued compensation until acceptable work alternatives can be found for them at GM.

In addition, The Wall Street Journal reports the UAW has agreed to a historic 2-tier wage structure that would allow GM to pay new hires at a lower rate than current UAW-represented employees.

The deal reportedly allows the auto maker to buy out many of its current workers, who earn about $70 an hour in wages, and replace them with new employees at far lower wages.

This would mark the first time the UAW has agreed to such a provision for an auto maker. Recent years have seen similar deals with Tier 1 suppliers, such as American Axle Mfg. Holdings Inc. and Delphi Corp.

“There also seems to be talk of another attrition program,” JP Morgan analyst Himanshu Patel writes in a research note. “While the devil will be in the detail, our first reaction is that GM captured a much broader set of concessions than we previously anticipated.”

In keeping with the UAW custom of withholding contract details until the rank and file is briefed, Gettelfinger says the deal is “different in some ways, and it’s better in other ways. I think our retirees will be exceptionally pleased.”

GM Chairman and CEO Rick Wagoner says in a statement: “This agreement helps us close the fundamental competitive gaps that exist in our business. The projected competitive improvements in this agreement will allow us to maintain a strong manufacturing presence in the United States along with significant future investments.”

Gettelfinger, who has indicated the UAW will adhere to its time-honored practice of pattern bargaining, says he likely will decide Thursday whether to seek the next labor contract from Ford Motor Co. or Chrysler LLC.

He also says emails have been sent to local UAW union officials, instructing them to have their members report for work in time for second-shift production today. GM was to contact skilled trades personnel to report early.

Gettelfinger credits the strike with accelerating talks, which stalled following nine days of continuous negotiations after the previous contract expired.

UAW preparations to present the deal for rank-and-file approval began minutes after an agreement was reached at 3:05 a.m. Information packages are expected to be distributed Thursday, while voting could continue through the weekend.

While industry observers and union insiders forecast stormy ratification meetings in anticipation of an agreement that favors GM, “When they see the details, it will pass,” UAW Vice President Cal Rapson tells Ward’s. “We’ve got some great job security.”

Rapson, who heads the UAW’s GM division, says active employees feared for retirees as the auto maker voiced concern about its total health-care bill, estimated at $5 billion annually.

“They also were worried about their own health care,” he says. “We took care of that (too). And job security is maintained throughout the 4-year agreement. We have some good stuff.”

Says Gettelfinger: “There is no question there are things in this agreement that will make (GM) more competitive. I don’t believe we’ll be back in this same spot (in 2011), providing the company continues to build products that people want. They’re starting to make a lot of headway in that area.

“You can’t cut your way to profitability,” he adds. “We’ve said that time and time again. We’re very comfortable that this agreement will put (GM) in a position where they can move forward.”

The UAW’s executive committee and its GM negotiating team are recommending acceptance. However, should the rank and file reject the deal, the union is prepared to “go right back out on strike,” Gettelfinger warns.

The union chief has no regrets about delaying the strike well past the previous contract’s Sept. 14 expiration. And the union received widespread support for its action.

“Based on the emails and the letters of support that we’ve received, I have never seen anything like it,” Gettelfinger says. “Support came in from everywhere. I was pleasantly surprised to see that union, and as well as non-union workers, around the country spoke out in support of what we were doing.

“People recognized that there is an erosion of the Middle-Class in this country. And the fact that we were standing up for jobs in America meant a lot to people.”

Gettelfinger says he had no direct contact with Wagoner during the contract talks. But he spoke with Chief Financial Officer Fritz Henderson about midnight Tuesday. Troy Clarke, president-GM North America, also was involved.

“We bargained hard for our membership,” Gettelfinger says. “(GM negotiators) bargained hard for the corporation. In this business, it’s not about how you feel about each other individually. It’s about stepping up and representing your constituents to the absolute best of your ability.”

Asked if this agreement represents a watershed moment in the union’s history, Gettelfinger says: “There’s a lot of historic things. I try not to put a label on it. It’s an agreement that we’re proud to recommend to our membership.”

– with James M. Amend

emayne@wardsauto.com