Detroit – General Motors and the United Auto Workers bet their futures on a dramatic labor agreement Wednesday that could ensure the survival of both – making GM more competitive against its foreign rivals and helping the union stanch the loss of members.
More broadly, the proposed labor contract has the potential to shape a new Detroit auto industry that can truly compete with the likes of Toyota, which does not have legacy costs in the United States.
The most pivotal feature of the UAW’s tentative deal with GM is a controversial retiree health-care trust that will shift tens of billions of dollars of retiree medical, hospital and prescription costs to the UAW and off GM’s books.
The agreement, which ended the first national strike against GM in 37 years, will serve as the template for agreements at Chrysler and Ford.
GM and union officials did not lay out terms of the deal; UAW president Ron Gettelfinger said he prefers the union first tell its members.
According to people familiar with the agreement, the four- year deal would provide UAW members with a $3,000 signing bonus and payments in the other three years, but no raises.
The total impact on active workers’ health care is still unclear, though it is thought workers’ annual cost-of-living raises will be diverted to help pay for retiree health care.
The UAW says it will be able to maintain membership figures, though no job-security details were released.
Even more than its fellow Detroit automakers, GM has been overwhelmed by retiree health- care obligations that made it difficult – if not impossible – to compete with global rivals.
Armed with a flush pension fund and potentially free of retiree health-care obligations – at a savings of at least $15 billion – GM can focus on a core business of making and selling cars and trucks. It also won the right to pay certain workers far less in wages and benefits.
“It’s a very important day for GM, probably one of the most important days in a decade,” said Michael Robinet, vice president of CSM Worldwide in Northville, Mich. “It has taken one of the perennial issues at the company … and it’s really applied a solution. This is not your grandfather’s contract.”
Harley Shaiken, a labor expert from University of California, Berkeley, agreed that the agreement was dramatic.
“It is a pivotal agreement,” he said. “The contract is meant to redefine the social contract between the company and the union going forward.”
GM hourly worker Rob Jones, 40, of Eastpointe, Mich., echoed several workers when he said that he will withhold final judgment on the deal until seeing the details. But he said he hopes there is a provision that protects his job.
“I am waiting to see the details at this point,” he said shortly after the 4 a.m. announcement as he walked a picket line at the Romulus Engine plant. “Whenever you have somebody negotiating for you, you’re always a little leery. You want to see the fine print.”
While working to reach a deal with GM first, the union extended its contracts with Chrysler and Ford.
Heading into the talks in July, GM wanted to bring its labor costs closer in line with foreign rivals that have U.S. assembly operations, a gap estimated at $20 to $30 an hour.
“I think our retirees will be exceptionally pleased with this contract,” Gettelfinger said. “And for our active membership, there will be … changes, but I think overall they will be very pleased with the outcome of these negotiations and the job security that’s associated with it.”
