August 23, 2014

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GM, UAW resume talks, said to be close to health care agreement

DETROIT — More progress was reported Saturday as negotiators for General Motors Corp. and the United Auto Workers worked on a historic new contract that would shift retiree health care costs from the company to the union.

Two people who have been briefed on the talks said Saturday that bargainers were getting closer to reaching a deal on the company funding a union-run trust that would take over much of GM’s $51 billion unfunded obligation to pay health care costs for retirees and current workers after they retire.

The people, who requested anonymity because the talks are private, said they were told negotiators are optimistic a tentative deal on the entire contract could be reached as early as Sunday or Monday. Any agreement would have to be ratified by GM’s 73,000 UAW members.

GM spokesman Tom Wickham said the talks began midmorning Saturday and recessed Saturday evening. They were to resume Sunday morning.

The UAW has picked GM as the lead company and potential strike target, so Ford Motor Co. and Chrysler LLC would likely match many of the terms of GM’s agreement.

One of the people briefed on the talks said early Saturday that the two sides had not agreed on how much GM would have to kick into the trust, called a Voluntary Employees Beneficiary Association or VEBA. Neither person knew if that had changed by late Saturday afternoon.

“They said they were real close,” one of the people said.

Erich Merkle, vice president of auto industry forecasting for consulting company IRN Inc. in Grand Rapids, said the trust fund is important to closing the U.S. automakers’ labor cost gap with their Japanese competitors. The Detroit Three say the gap is about a $25 per hour including wages, benefits and retiree health care costs.

But an agreement on the trust alone isn’t enough for the company because competitive disparities remain in areas other than retiree health care, Merkle said.

The U.S. companies still pay workers most of their salaries when they are laid off, and they still in many cases pay UAW wages and benefits for janitorial, landscaping and cafeteria workers, items that Japanese automakers contract out for less money, Merkle said.

“The market just isn’t going to support inefficiencies. Either the UAW, they can pick up health care and they can help GM out here, or they can let the market take care of things later,” Merkle said. “When the market corrects the situation, it’s going to be brutal. It’s a bankruptcy situation.”

GM, which has about 540,000 UAW retirees and spouses, badly wants to pay the union to form VEBA and get the health care liabilities off its books. The UAW is seeking guarantees of new vehicles to be built in U.S. plants in exchange.

The structure of the trust and how the company would make its contributions are incredibly complex, said one of the people who had been briefed on the talks. Analysts say the contributions could be made in cash or stock.

Bargainers recently have been focused on other economic issues that hinge on the trust including pensions, wages, profit sharing, and who manufactures company parts, one of the people briefed on the talks said.

Wickham and UAW spokesman Roger Kerson declined to comment on developments.

On Saturday, UAW Local 276 in Arlington, Texas, posed an update on its Web site saying that negotiators are working toward a tentative agreement.

“The negotiating team has remained in negotiations in an attempt to get a fair and equitable national agreement. They have not only been at the bargaining table for 18 straight days but they are also committed to giving us the best representation possible,” the local’s Web site said.

Union President Ron Gettelfinger told members in a message on Friday he was trying to speed up negotiations with General Motors and wanted to reach an agreement without a strike.

GM and the UAW have asked an independent party to review both sides’ financial calculations for the health care trust, according to the people who were briefed on the talks.

Negotiators have settled noneconomic issues such as grievance procedures, the people said.

Earlier this week, the two sides were still billions of dollars apart on how much GM should put into the trust. Analysts have said GM wants to pay about 65 percent of its retiree health care obligation to the union, some in cash and some in stock.

Protracted contract talks aren’t unprecedented. In the last three negotiations — in 2003, 1999 and 1996 — the UAW settled with the lead companies within a few days of the deadline. But in 1996, the UAW’s negotiations with GM dragged into November even though it reached an agreement in September with Ford.