Local union leaders on Friday endorsed a tentative agreement between General Motors Corp. and the United Auto Workers that requires GM to pay out at least $35 billion for retiree health care, establishes lower wages for thousands of new employees and offers an unprecedented number of promises for future work at U.S. plants, according to a summary of the agreement provided by the UAW.
The agreement still is subject to a vote of GM’s 74,000 UAW members, which should be completed by Oct. 10. UAW President Ron Gettelfinger said he’s confident members will support the agreement and that Ford Motor Co. and Chrysler LLC will match many of its terms.
“We’re happy with this stuff,” he said.
GM spokesman Dan Flores said both UAW workers and the company benefit from the agreement. GM didn’t release any specifics of the contract Friday; the company typically waits until the contract is ratified to make detailed comments.
“Not only does this new agreement enhance the security for employees and retirees, it enables GM to close competitive gaps in our business, and the projected competitive improvements will allow us to maintain a strong manufacturing presence in the U.S. with significant future investments,” Flores said.
Gettelfinger said he hadn’t yet decided whether the union would negotiate with Ford or Chrysler next, but he expects to make that call next week. Both automakers have extended their contracts with the union indefinitely.
The linchpin of the deal is a trust fund for retiree health care, known as a Voluntary Employees Beneficiary Association, or VEBA. GM, which has around 340,000 retirees and spouses, wanted to form the VEBA in order to get $51 billion in retiree health care debt off its books. The VEBA will be run by an independent board overseen by the UAW.
GM will put $24.1 billion into the VEBA in January 2008 and will pay an additional $5.4 billion to cover retirees’ health care costs until the VEBA takes over in January 2010. GM also will make up to 20 additional $165 million payments — to a maximum of $1.6 billion — to the VEBA anytime the fund’s level is insufficient to provide benefits for at least 25 years.
GM also will be required to pay cash interest on a $4.37 billion convertible note for the benefit of the VEBA. The fund’s trustees will be able to convert that note to GM stock, which could be a windfall for the fund if GM’s share price goes up. GM’s active workers also will be required to contribute a small amount of their cost-of-living increases to the VEBA.
In a two-page letter to retirees sent Friday, the UAW sought to calm retirees’ fears about the VEBA, saying the union supports the fund because it protects retirees’ benefits in the event of a downturn or bankruptcy. Retirees don’t get to vote on the contract.
The UAW was seeking to protect jobs and slow its falling membership in this contract, and Gettelfinger said GM responded with “unprecedented product guarantees.” GM committed to building current or existing products at 16 of its 18 U.S. assembly plants, according to the UAW’s summary. GM already has announced the closure of a plant in Doraville, Ga., in 2008. A midsize sport utility vehicle plant in Moraine, Ohio, wasn’t listed because its workers are represented by the International Electronics Workers-Communications Workers of America.
The 16 factories either will continue building their current products or, in most cases, the next generation of those products. A plant in the Detroit area is scheduled to begin producing the electric Chevrolet Volt, one of GM’s most anticipated products, in 2010, while a plant in Lordstown, Ohio, is set to get a new subcompact.
“The whole thing looks fantastic,” said Dave Green, president of one of two local unions in Lordstown. The agreement, he said, preserves wages and health care for active workers “and we’ve done creative stuff that’s going to make the company profitable in North America.”
But the future of some plants may be in jeopardy.
GM’s Orion Township plant, which will make the Pontiac G6 mid-sized car until 2013, and the Wilmington, Del. plant, which makes the Pontiac Solstice and Saturn Sky roadsters until 2012, do not have new vehicles listed on the UAW’s summary.
Eldon Renaud, head of United Auto Workers Local 2164 in Bowling Green, Ky., said production of the Pontiac Solstice and Saturn Sky will move from Wilmington to his plant, leaving Wilmington’s future in doubt.
The union said assembly line workers will get economic gains totaling $13,056 over the life of the four-year contract. They will get bonuses in each year of the contract, including a $3,000 bonus when the contract is ratified, as well as cost-of-living increases.
But some workers will be making less than before.
New hires who are doing what are considered noncore functions, such as combining parts from suppliers to prepare them for the assembly line, managing parts and chemicals and driving finished vehicles, will make between $14 and $16.23 an hour, or about half the starting wage of $28.12 that assembly workers would make under the new contract. Those workers also would get a 401(k)-style retirement plan instead of a fixed pension, according to the summary.
There are more than 16,000 people doing noncore work in U.S. plants right now, the UAW said in its summary. Gettelfinger said there would be a buyout plan to replace noncore workers with new hires, but he said the details still were being worked out. A person briefed on the contract said earlier this week that GM plans to offer early retirement and buyout packages of $35,000. The person requested anonymity because the buyout plans haven’t been made public.
Under the tentative contract, 3,000 temporary workers also will get permanent jobs at the full-time wage rate, according to the union’s summary. GM also would in-source 3,000 jobs now contracted to parts suppliers, the union said.
If the company’s UAW members ratify the deal, its provisions likely will save the company about $3 billion per year, which it can pump into the development of new products, according to several industry analysts.
GM shares rose 24 cents, or less than 1 percent, to close at $36.70 Friday on the New York Stock Exchange.