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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.
from the September 27, 2007 edition
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Investment in US plants – especially ones whose future has been in doubt – is what the union means when it talks of "job security" as a top goal in bargaining.
According to the Associated Press, GM generally agreed that with the reduced costs from the new contract, investment in the plants would make good business sense.
"We're very comfortable with this agreement, and we're happy to be able to recommend it to our membership," UAW president Ron Gettelfinger said. "I'm pleased to say that we have a VEBA in place that will secure the benefits of our retirees."
That arrangement with GM probably paves the way for a similar deal at Ford and possibly Chrysler in the UAW's ongoing contract talks with those companies.
The VEBA is key – and not only because those retiree healthcare costs account for a sizable share of the labor-cost gap between GM and its competitors.
"It will change a very longstanding principle" for the UAW, says Joseph D'Cruz, a University of Toronto expert on the industry. Hard-won social-welfare elements of past contracts have long been off the table, he says. Now "they've actually become negotiable."
Both sides knew that the status quo wasn't working. Labor costs are far from the only key to Detroit's success, but the cost gap weighs down the US companies in an era of rising competition. In addition to Japan and South Korea, the threat of China and India as automobile exporters now looms.
Adding pressure on the union, GM itself is increasingly a global company, with fast-growing foreign markets competing with the US for its investment dollars.
America remains the core market in terms of revenues. But GM now has more factory workers – and makes more cars – outside the US than inside. That trend, even more than the union's two-day strike this week, hung as a threat over contract talks.
GM is more global than Ford or Chrysler, but all the automakers are moving that way. Chrysler, now under private-investor ownership, has a deal with Chinese manufacturer Chery to build small cars for export.
"That's obviously the thin end of the wedge," Mr. D'Cruz says. "If they can build the lowest end [models] in China, then what about the next level?"
No one is expecting US production to disappear. This week's deal offers the union hope that its job base won't shrink too fast.
"This is really a win-win solution," says John Wolkonowicz, an auto analyst at the consulting firm Global Insight in Lexington, Mass. But "is Detroit out of the woods with this? No way."
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