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| Ron Gettelfinger, head of the United Auto Workers, announced Wednesday an innovative trust fund that will finance healthcare
for union retirees. Carlos Osorio/AP |
Auto workers make concessions to keep jobs in U.S.
But innovative fund secures healthcare for retirees even if General Motors goes bankrupt.
By Mark Trumbull | Staff writer of The Christian Science Monitorfrom the September 27, 2007 edition
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A historic deal between America's largest carmaker and the industry's labor union promises to help Detroit become more competitive with Asian rivals.
In that sense, the tentative agreement reached Wednesday represents a win for both sides. But for workers, it's as much about sidestepping defeat as declaring victory.
At the core of the accord between General Motors and the United Auto Workers is a simple trade-off: The union makes major concessions that will help the company bring down labor costs, and in return it wins the hope of retaining many of its remaining US jobs.
"They have to have GM invest in North America in order to ensure their long-term viability as a union," says David Cole, who heads the Center for Automotive Research in Ann Arbor, Mich. The price of getting a degree of job security, he says, is to help GM bring its labor costs much closer to those enjoyed by Asian rivals such as Toyota.
The deal Wednesday morning ended a two-day national strike against GM. The details were not immediately made public, as the union communicated first with its own membership.
But according to news reports, the broad outlines of the pact involved gains for both sides. It includes a groundbreaking move to shift responsibility for retiree healthcare from the company to a union-administered trust fund. This lowers GM's hourly labor costs, which include healthcare, and removes uncertainty about its long-term health-cost burden.
For the union, the healthcare arrangement provides assurance that hard-won benefits won't disappear if GM is ever forced into bankruptcy. GM will kick billions of dollars into the fund, known as a VEBA (voluntary employee beneficiary association).
On wages, the company will pay some new hires in nonmanufacturing jobs a lower rate than its current employees in those jobs. Instead of formal pay raises, the company agreed to annual lump-sum payouts to workers.
All this amounts to a carefully choreographed plan that both sides hope will help GM restore profitability to its North American operations.
In the talks, the company in effect gave the union a choice, Mr. Cole says. Under Plan A, the UAW makes big concessions, and GM is able to keep jobs in the US. The alternative, if the union refused to cut costs enough, is Plan B: "Disinvest in the US."
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