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Eileen Duff of Lansing, Mich., the wife of a retired United Auto Workers union member, pickets the opening of the 2007 contract negotiations between GM and the UAW on July 23 in Detroit.
Bill Pugliano/Getty Images
The United Auto Workers have called their first nationwide strike in more than three decades. The union blamed the walkout on what it described as General Motor's unwillingness to meet it halfway.
UAW head Ron Gettelfinger said the key issue holding up talks now does not involve the plans for a health-care trust fund that the union would manage. Instead, he said it is job security for his workers who face the threat of seeing their positions shipped overseas.
GM said it was disappointed by the strike and wants to reach an agreement as soon as possible.
Here's more on the health-care trust fund initially at the heart of the talks — and on what is at stake:
People call these among the most important talks in the history of the auto industry. Why?
They are about fundamental change. The question is who will take responsibility for about $100 billion in health care for retirees. That obligation is crippling companies as they try to compete against lower-cost, foreign firms. People who follow the car business say the future of the Detroit companies may be at stake.
What's the solution?
Both sides are interested in a health-care trust fund. The companies want to put money in a fund and let the union take over responsibility for retiree health care. The companies are talking about paying perhaps 65 cents on the dollar, but the union wants more, because it's worried the fund could run out and workers would be left hanging.
What does each side get out of a trust fund?
Control over their destinies. By getting health care obligations off the books, the companies insulate themselves from costs they can't predict. With a cleaner balance sheet, the firms can invest more in new products and — presumably — become more competitive. The downside for the union is obvious: it takes on the headache of rising health-care costs. But a trust fund also provides insurance. If a company goes bankrupt, creditors couldn't touch the trust fund — which would be separate from the firm — and retiree health care would be protected. Without a trust fund, a bankruptcy judge could void the union contract and retirees could lose all their health-care benefits.
What role does global competition play in all of this?
It's a huge factor. Back in the 1970s, the "Detroit Three" essentially were the U.S. car market. Today, it's a crowded field; foreign competitors, including the Korean firm, Hyundai, have factories throughout the American South. And when it comes to retiree heath care, there's no comparison. In the United States, Toyota has maybe 300 retirees compared to nearly 270,000 at General Motors. And at home, the company operates under Japan's state-run health care system.
Will a health-care deal solve the problems of the Detroit car companies?
No. Their troubles are deeper and some of the wounds are self-inflicted. The companies tilted production towards light trucks and SUVs, but that strategy collapsed when gas prices soared. And the firms need to improve their image with consumers. Even though quality has improved considerably in recent years, many people still view Detroit-made cars as second-tier products.