GM-UAW Deal May Change American Car Industry

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The United Auto Workers' two-day strike against General Motors ended after the company will shift responsibility for retiree health care onto the union. The tentative contract, in which the union earned commitments to keep manufacturing jobs in the United States, could reshape the U.S. auto industry.

ROBERT SIEGEL, host:

This is ALL THINGS CONSIDERED from NPR News. I'm Robert Siegel.

MELISSA BLOCK, host:

And I'm Melissa Block.

The contract is in the hands of local UAW president's and the union's head, Ron Gettelfinger, says members will likely start voting on it this weekend. The two-day strike against General Motors is over, and tens of thousands of UAW members went back to work today. The deal will dramatically cut costs for GM and help it compete against foreign rivals. In exchange, the company has committed to protect union jobs from being shipped out of the country.

In a few moments, we'll hear how some GM workers are reacting. But first, NPR's Frank Langfitt reports from Detroit on the landmark agreement.

FRANK LANGFITT: With today's deal, the struggling auto giant took a big step forward to compete in the global marketplace. Currently, it spends about 25 more dollars an hour for labor than rivals like Honda. Under the new agreement, it could cut that gap in half.

Rebecca Lindland is an analyst with Global Insight, a research firm. She says GM looks a lot healthier today than it did yesterday.

Ms. REBECCA LINDLAND (Analyst, Global Insight): Some people consider GM on life support. And instead of the plug being pulled, you know, the respirator was turned off because you're doing so much better. So I think that that's sort of where GM is now.

LANGFITT: The centerpiece of the contract is an agreement by the union to take over responsibility for more than $50 billion in retiree health care. The company agreed to pay about 70 percent of that obligation into a trust fund. The fund is called a Voluntary Employees Beneficiary Association, which people referred to as a VEBA. Under the deal, the union would run it. The advantage for the union is that if GM ever went bankrupt that money is safe.

Ms. LINDLAND: The UAW gets guaranteed health care. I mean, they're - basically, because GM is funding it at 70 percent upfront, they are being able to look at their retirees and their health care system and say, we have you covered, and that's huge.

LANGFITT: But many of GM's nearly 270,000 retirees don't see it that way. They fear if health care cost continue to spiral, the fund could run dry. That's what happened a couple of years ago for the UAW trust fund at Caterpillar. Retirees are now having to pick up the tab.

At this morning's press conference, union president Gettelfinger tried to calm members' fears. He said, outside analysts had crunched the numbers, and they looked good.

Mr. RON GETTELFINGER (President, United Auto Workers): I'm pleased to say that we have a VEBA in place that will secure the benefits of our retirees, and that stretches out in our projections for the next 80 years. And that's all I'll say on that.

(Soundbite of applause)

LANGFITT: GM also got other cost savings in this deal. They include the freedom to hire non-production workers 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.

So what did the United Auto Workers get for all this? A commitment to keep union employment at the current level of 73,000. After the press conference, union vice president Cal Rapson outlined the quid pro quo.

Mr. CAL RAPSON (Vice President, United Auto Workers): In the trade, (unintelligible) taken that liability off their books was some major job opportunities and no outsourcing. If the market stays the same, we'll have as many people if not more in four years.

LANGFITT: Were there any commitments to new products?

Mr. RAPSON: Now, you know better than that. Yes, we have a lot of commitment about it, lots, but I'm not going to - we'll share that with our membership.

LANGFITT: In the coming days, those pledges and new products could become clearer. Plants angling for new vehicle lines include one in Lordstown, Ohio, which is lobbying for the Chevy Volt, a plug-in hybrid. GM wouldn't give specifics either, but spokesman Tom Wickham confirmed the company's commitment.

Mr. TOM WICKHAM (Spokesman, General Motors): Job security is part of the agreement, and the GM and UAW negotiators had healthy discussion about that and the importance of it for the company, but also for the members.

LANGFITT: Now, Gettelfinger will move swiftly to try to win over skeptical members. He says he hopes to hold ratification votes around the country this weekend. And the contract had something to help them do that as well - signing bonuses for members worth thousands of dollars.

Frank Langfitt, NPR News, Detroit.

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