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Presidents of two UAW locals hope tentative agreement will bring future production to factory complex
By From staff and wire reports
Published on Thursday, Sep 27, 2007
While specific details have yet to be revealed on the tentative agreement reached Wednesday morning between the United Auto Workers and General Motors, the presidents of the two Lordstown UAW locals think there's good news coming regarding their factory complex's future.
The UAW won bonuses, an agreement from GM to hire thousands of temporary workers and commitments to invest in U.S. plants, according to a person who was briefed on the contract. The person requested anonymity because details haven't been publicly released.
GM got a historic contract agreement that takes $50 billion of future health-care obligations off the automaker's financial books and could transform the competitive landscape of the U.S. auto industry.
Because the agreement includes language on maintaining UAW job numbers, Jim Graham, president of Local 1112, said he's optimistic about the future of Lordstown. His local represents about 2,400 hourly workers who assemble two small cars, the Chevrolet Cobalt and Pontiac G5. Production there is scheduled to end in June 2009; the Lordstown unions and management have been working to get other GM vehicles to make.
''The (contract) information is just now starting to trickle in,'' said Graham.
Graham and Dave Green, president of Local 1714 that represents workers in the Lordstown fabrication facility, expect to go to Detroit in a day or two to review the tentative agreement. Once that is done, the proposed contract will be disseminated among the membership and then put to a vote, they said.
Green said he thinks the new contract will be good for the United States, and that he feels confident Lordstown will have a future after Cobalt and G5 production ends. He also cautioned that he has seen no language to that effect.
''We were standing out on the picket line to secure job security,'' Green said. ''I think this strike gave this local a renewed sense of solidarity.''
Blueprint for others
The accord, ending a two-day strike, is designed to allow the Detroit automaker to operate with a cost structure closer to that of its Japanese rivals. Should the four-year deal be approved by GM workers, Ford Motor Co. and Chrysler LLC will seek similar UAW contracts. GM shares rose 9.4 percent Wednesday, leading gains for automakers and parts suppliers.
''This begins to solve the significant legacy cost for the domestic auto producers which has just put them at such a comparative disadvantage to the foreign competition,'' said David Sowerby, a portfolio manager at Loomis Sayles & Co. in Bloomfield Hills, Mich.
GM Chief Executive Officer Rick Wagoner won most of the things he sought to ensure GM's survival, including the centerpiece, the union-run retiree health-care fund. The contract also limits growth for wage increases and introduces an idea the union has fought against since its inception in 1935 multiple tiers of wages for workers on the same assembly line.
UAW President Ron Gettelfinger said he received ''outstanding'' job security pledges for U.S. workers. He told reporters he feels ''very good'' about the accord and will seek its approval in voting this weekend.
The agreement allowed Detroit-based GM to restart operations at more than 80 U.S. locations shuttered by the walkout. The action, which sent more than 73,000 union workers to the picket lines, was the first national work stoppage at GM since a 67-day strike in 1970.
GM agreed to contribute $35 billion to start the retiree health-care fund, two people familiar with the accord said. That's equal to 70 percent of the value of the company's outstanding retiree health liability.
The automaker agreed to additional buyouts of more senior workers to make room for 4,100 recently hired temporary employees to be made permanent, people familiar with the agreement said.
GM won the right to pay newly hired employees less than existing workers, the people said.
Instead of a wage increase, union workers will receive a signing bonus of $3,000, plus three annual lump-sum payments equal to 3 percent of wages, the people said. The UAW also agreed to divert a portion of future wage increases to pay for health care for both active and retired workers, the people said.
''We retained the medical benefits we have without additional out-of-pocket costs for either active or retired workers,'' said Art Baker, bargaining chairman of UAW Local 652 at the Cadillac plant in Lansing, Mich.
Old contract expires
The two sides negotiated 12 days past the scheduled Sept. 14 expiration of the previous contract.
UAW members at GM walked out on Monday. Gettelfinger said at the time that GM wasn't willing to ensure the job security of UAW workers.
''We got the job-security guarantees we were looking for,'' Gettelfinger said. These include a modified version of the ''jobs bank'' program that lets UAW members receive paychecks even if there was no work for them to do, he said.
Gettelfinger predicted that at the end of the four-year contract, the union's membership will be about the same as it is today 73,454 active GM employees assuming the company can maintain its sales volume.
GM sought to shift future retiree health-care obligations off its books through creation of a union-run fund called a ''Voluntary Employees' Beneficiary Association,'' or VEBA, that it would help to finance. Retiree medical liabilities at GM, Ford and Chrysler totaled $114 billion at the end of 2006.
''It's based on cash flow and solvency,'' Gettelfinger said. ''Based on the trend, the discount rate, and other projections, that VEBA will be solvent for 80 years.''
The negotiations played out against the backdrop of $15 billion in combined 2006 losses for GM, Ford and Chrysler.
Unlike pensions, retiree health care isn't insured by the U.S. government and companies aren't required to fund it at any particular level.
While specific details have yet to be revealed on the tentative agreement reached Wednesday morning between the United Auto Workers and General Motors, the presidents of the two Lordstown UAW locals think there's good news coming regarding their factory complex's future.
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