The United Auto Workers and General Motors reach a tentative deal to end a two-day nationwide strike. The agreement shifts the burden of retiree health care from GM to the union and gives workers bonuses. Ratification is expected this weekend.
RENEE MONTAGNE, host:
It's MORNING EDITION from NPR News. I'm Renee Montagne.
The United Auto Workers Union has called off its strike against General Motors. The news came in the early hours of this morning, as the two sides announced that they'd reached a tentative agreement on a new contract. That deal still must be approved by rank-and-file union members.
Here is how GM spokesman Dan Flores described the deal.
Mr. DAN FLORES (General Motors Spokesman): We think we've got an agreement here that is subject to ratification, that not only is good for the company, it's good for the union and the members that it represents.
MONTAGNE: That's GM spokesman Dan Flores.
NPR's Frank Langfitt is covering this story, and he joins us now from Detroit. And Frank, what seems to be the breakthrough here that ended this strike?
FRANK LANGFITT: Well, you know, when the United Auto Workers went out on Monday, they said this was all about job security. And they are concerned, because of global competition around the world and the fact that GM can make cars in so many different places, workers were really worried that they were going to lose their jobs. And what they're saying now is that they got a general agreement for job security.
I talked to Cal Rapson, he's the vice chairman of the UAW, after this 4:00 a.m. press conference this morning, and he said that he thinks the union can keep its levels, the job levels up to about 73,000, over the term of this next contract over the next four years, and maybe even more. But what's missing right now is specifics. There are people in Lordstown, Ohio; Fairfax, Kansas, that are looking for new products from GM - workers. And what we - it may be a while until we find out, you know, exactly where this new investment will come.
MONTAGNE: And the significance of this agreement?
LANGFITT: It's huge. You know, what GM has been looking for is to completely rework its cost structure. It's been getting clobbered by Toyota and Honda because, for one reason, its health care costs for retirees are much, much greater. And so what they've done here, and this is really the big story, I think, is they've put together a health care trust fund. And what GM is going to is it's going to put a lot of money into this trust fund, maybe 35, 36, $37 billion, and the union is going to take over responsibility for retiree health care. And what GM hopes is this will free it up to make new investment, to be more competitive, and get these expenses off its books. So that, from GM's perspective, I think, is huge. And it also kind of transforms the relationship between this very famous American company and this once very strong union.
MONTAGNE: Well, let's talk about this health care fund from the union's point of view. How would it work and what are the concerns?
LANGFITT: Well, the major concern, and I think if you talk to retirees - I've spending a lot of time with retirees over the last week or two here in Detroit - and their great concern is what happens if health care costs keep rising really fast? Is there going to be enough money for me in my retirement to look after me or am I going to have a lot of higher co-pays, high premiums? And a few a years back, United Auto Workers did a deal with Caterpillar on this exact kind of deal, and the money ran out a few years ago. So when you'll talk to retirees, they'll say, hey, this happened to Caterpillar.
Now, when I was talking to the UAW this morning, they said they have certain backstops, that they've crunched the numbers very carefully and they think that this is going to last a long time. In fact, the president, Ron Gettelfinger, said to us this morning that he thinks that this health care trust fund will last for 80 years.
MONTAGNE: And of course, the way it works would be billions put in by GM and then that generates more income, which would then theoretically pay for this health care.
LANGFITT: Exactly. And it all comes down to really how the union manages this fund, the kind of investments that it makes, and its return on the stock market in - just like all the rest of us, when we look at our retiree accounts and things like that.
MONTAGNE: Does the union, Frank, come out of this strike in a stronger position?
LANGFITT: I think what the union is looking for, unlike in, you know, past contracts, instead of looking for gains, it was looking not to lose anything. And I think that in terms of jobs, at this point, if indeed these job guarantees do work out and we still have to be - that still remains to be seen - I think they can be said to have done reasonably well. I mean, it's a - the union hasn't really weak hand in this environment right now. And I think Ron Gettelfinger is just trying to play it as well as he can for his members.
MONTAGNE: And just briefly, where to from here?
LANGFITT: Well, the next thing is ratification. And the UAW is going to have a big sales job. What you'll see in the next few days is they'll be going to the members and saying, listen, we got a really good deal. It's a tough environment. We really need your vote to ratify it. And we could see that, those votes, as early as this weekend.
MONTAGNE: NPR's Frank Langfitt in Detroit. Thanks, Frank.
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The United Auto Workers and General Motors tentatively agreed Wednesday to a contract that ends a two-day strike — the first nationwide walkout against the automaker in 37 years. Both sides said they are pleased with the new contract, which has yet to be approved by the union. Here are a few of the highlights:
Legacy Costs: The new contract transfers responsibility for retiree health benefits from GM to the union. Under the agreement, the UAW will hire a financial company to manage the health care trust. That allows GM to clear a $50 billion liability from its books — which the company says has hindered its ability to raise funds and compete against foreign rivals. Still, GM will have to pay about 70 percent of that obligation — some $35 billion — to fund the new health-care trust.
New Workers: New unionized workers in certain non-production jobs would be hired at lower wages. That could be a big help for a company that spends upwards of $70 an hour on wages and benefits for janitors. In exchange, the UAW gets a commitment from GM to keep union employment at the current level of 70,000.
Signing Bonuses: GM workers will receive a signing bonus worth thousands of dollars to accept the deal. But those workers give up their cost-of-living adjustments, and the company gains more control over setting future salaries. Job Security: The new contract "will absolutely protect their jobs and keep jobs from being reduced," said UAW President Ron Gettelfinger. He offered few specifics, but said the number of jobs at GM would be "pretty much the same, if not higher" when the contract concludes in 2011. But job protection provisions don't go into effect until after GM completes a planned restructuring— which includes cutting 30,000 jobs and closing all or part of a dozen plants by next year.
The United Auto Workers and General Motors Corp. agreed to a tentative contract early Wednesday that ends a two-day national strike — the first against the automaker in 37 years.
The union and automaker confirmed that the deal creates a GM-funded, UAW-run trust fund to administer retiree health care, but the two sides gave few details.
GM said in a statement that the deal will make it significantly more competitive and provides "the basis for maintaining and strengthening its core manufacturing base in the United States."
The company went into the negotiations seeking to cut or erase what it said is about a $25-per-hour labor cost disparity with its Japanese competitors.
"This agreement helps us close the fundamental competitive gaps that exist in our business," Chairman and Chief Executive Rick Wagoner said.
The union said the agreement with the nation's largest automaker was reached shortly after 3 a.m. and the strike was called off about an hour later. The deal means UAW workers will head back to their jobs at around 80 GM facilities across the nation. The union went on strike Monday when talks broke down, ending GM's production and causing layoffs and shutdowns at parts factories.
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, including more than 2,000 at GM's assembly plant in Arlington, Texas. The agreement is expected to set a pattern for contracts at Ford Motor Co. and Chrysler LLC.
The strike was the first such nationwide action strike against GM during auto contract negotiations since 1970. The UAW last struck GM in 1998, when a 54-day work stoppage at two plants shut down production across the country.
Remaining Competitive with Japan
GM went into the negotiations seeking to cut or erase what it said is about a $25-per-hour labor cost disparity with its Japanese competitors.
The tentative deal includes GM's top priority in the negotiations — shifting most of its $51 billion unfunded retiree health care obligation to a UAW-run trust. GM would pay about 70 percent of that obligation, or $36 billion, into the trust fund, called a Voluntary Employees Beneficiary Association, the person briefed on the talks said.
The union would then invest the money and take over the health care responsibility for about 340,000 GM hourly retirees and spouses.
"I'm pleased to say that we have a VEBA in place that will secure the benefits of our retirees," UAW President Ron Gettelfinger said at an early morning news conference inside the union's Detroit headquarters.
Deal Needs Union, Government Approval
Gettelfinger said he's confident of ratification and that voting could begin this weekend.
The UAW's national negotiating committee and executive board for GM both have unanimously recommended ratification, Gettelfinger said.
"We're very comfortable with this agreement, and we're happy to be able to recommend it to our membership," Gettelfinger said. Union leaders will be briefed on details Thursday and Friday, he said.
The UAW may also decide Thursday whether to begin talks first with Ford or Chrysler. Those talks can begin before the GM contract is ratified, Gettelfinger said.
After ratification, the VEBA memorandum would have to be approved by the courts and would be reviewed by the U.S. Securities and Exchange Commission, GM said.
"There's no question this was one of the most complex and difficult bargaining sessions in the history of the GM-UAW relationship," Wagoner said. He thanked the UAW bargaining team for its work in reaching the agreement.