GM Ends Strike, Tries Health Plan

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Detroit Free Press / MCT / Landov

UAW President Ron Gettelfinger, at podium, announces a tentative agreement with automaker GM, September 26, 2007, in Detroit, Michigan.

The United Auto Workers pulled down its pickets around General Motors Corp. plants across the United States early Wednesday morning. The union's leadership said it was satisfied with GM's guarantees of job security — the ostensible reason for the strike. The scene is now set for ratifying a labor agreement that would shift GM's liabilities for retiree health care to a Voluntary Employee Benefit Association (VEBA) that would be run by the union itself.

The next task is for the UAW leadership to overcome skepticism about the VEBA among its rank and file, both active and retired. Union skeptics have been waging an underground campaign against the VEBA on the Internet for the past several weeks and it is having an impact. "I think it's a conflict of interest for the union to represent us and take care of our health care," said Tom Avery, a UAW retiree from Pontiac, Michigan who was helping out on the union's picket lines.

UAW president Ron Gettelfinger said he was confident the VEBA trust will have sufficient resources to pay for the health care of present and future retirees for the next 80 years. "I think our retirees will be exceptionally pleased with this contract," he told reporters during an early morning press conference convened to announce the end to the union's first nationwide walkout against GM since 1970. "We feel very good about this agreement," he said. Other unions, including the Teamsters and building trades unions, have helped administer union members' health care benefits for decades.

GM chairman and CEO Rick Wagoner, who launched an effort to turn around GM's money-losing North American operations two years ago, hailed the agreement. "There's no question this was one of the most complex and difficult bargaining sessions in the history of the GM/UAW relationship," said Wagoner. Wagoner and Gettelfinger offered few other details of the settlement. However, GM is expected to transfer enough cash and other assets into the new trust to cover about 70% of the company's current health care liabilities of nearly $50 billion, sources said.

Retiree health care now cost GM $3.3 billion per year and retired hourly workers account for three quarters of the annual bill, which also represents a substantial piece of GM's labor costs of $73.26 per hour. The cost is $25 to $30 per hour more than the labor costs of Asian rivals such as Toyota and Honda that have plants in the U.S. The creation of the VEBA could eliminate as much as one half to two-thirds of the gap virtually overnight.

Gettelfinger also said the new agreement includes the job security guarantees sought by the union and predicted GM's employment level will remain constant over the four-year term of the contract. The lack of guarantees from GM on job security triggered the strike Monday, Gettelfinger said shortly after the walkout began. The job-security guarantees are expected to include firm commitments to build future GM products, including the electric-powered Chevrolet Volt, in the United States. Some observers have speculated, however, that the job-security walkout was merely a cover for the more far-reaching and sensitive health care financing agreement.