Let's just say that GM had to do this, given the intense and growing competition in the auto industry. Yet might it not mean an accelerated move to offshore production?
Ed -------------------------------------------------------------------------------- >From Bloomberg: GM Contract Wins Union Leaders' Approval; Vote Next (Update7) By John Lippert and Bill Koenig Sept. 28 (Bloomberg) -- General Motors Corp.'s new contract with the United Auto Workers was unanimously approved by a panel of union officers, clearing the way for a vote by rank-and-file members within 12 days. Under the historic, four-year agreement, GM will put $29.9 billion into a retiree-health trust fund that takes effect in January 2010, according a union summary. GM will continue to pay retiree health-care costs at the current rate, estimated to total $5.4 billion, until the fund takes over, the UAW said. The deal, highlighted by the retiree fund, includes other provisions that GM Chief Executive Officer Rick Wagoner's said he needed to close a $25- to $30-an-hour labor gap with Toyota Motor Corp. UAW President Ron Gettelfinger gets job guarantees and pay improvements sought by his workers in exchange for concessions. ``The UAW took care of their membership; GM took care of their shareholders,'' said Richard Block, a labor professor at Michigan State University in East Lansing. ``The people who will be voting on this will be pretty happy.'' About 175 officials from UAW locals voted on the accord today at a meeting of the union's National Bargaining Council in Detroit. The vote in favor was unanimous, Gettelfinger said at a news conference. He said he expects the union's 73,000 GM members to approve the deal as well. GM spokeswoman Katie McBride declined to comment. $13,056, Four Years The union said the average worker will gain $13,056 over the life of the agreement, based on a 2,080-hour year and 10 percent overtime. That includes a $3,000 bonus in the first year, a 3 percent bonus in the second year, 4 percent in the third and 3 percent in the fourth. An assembly worker's hourly rate will rise to $28.85 at the end of the fourth year from $28.12. GM, the largest U.S. automaker, and the union reached the agreement on Sept. 26, following a two-day strike. If ratified in votes scheduled through Oct. 10, the accord would replace a four- year contract that expired Sept. 14. GM sought to create the retiree-health trust to take about $50 billion of future obligations off its books. GM rose 24 cents to $36.70 at 4:05 p.m. in New York Stock Exchange composite trading. `Backstop' GM will provide a ``backstop'' of as much as $1.6 billion as part of the $29.9 billion contribution to the health-care fund, the summary said. The backstop may be doled out in individual payments of $165 million annually for as many as 20 years. The payments will be required at any time the fund trustees determine there are insufficient assets to cover the next 25 years of health-care costs, according to the summary. GM will pay $24.1 billion into the fund on Jan. 1, 2008, and contribute a bond convertible to shares worth $4.3725 billion, as well as the annual cash interest for the note. Retirees will receive an additional $66.70 a month from their pension, offset by a $51.67 payment to the fund. 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. As of June 30, GM had set aside $18.9 billion toward hourly and salaried employee retiree medical expenses, including $3.6 billion available for immediate use. To make its initial contribution to the fund, known as a Voluntary Employee Benefit Association, or VEBA, GM could tap various sources, said Rod Lache, a Deutsche Bank analyst in New York. Paying for VEBA According to Lache, they include: The existing $18.9 billion in cash reserves for retiree health care; the $4 billion GM's receiving in separation payments from its former parts unit Delphi Corp.; and $5.5 billion it's receiving from selling the Allison Transmission unit. ``GM should be able to make the initial VEBA payment without diluting existing shareholders with any kind of new offering,'' Lache said. ``That's a positive, because a lot of people had been bracing for GM to have to raise a substantial amount of capital.'' The agreement also calls for GM to ``in-source'' 3,000 jobs now being performed by outside suppliers, the summary said. The automaker agreed to hire 3,000 employees now considered temporary. The union also said GM agreed to a moratorium on sending work to outside suppliers. Wage Scale GM gained a wage scale that pays new workers less than current factory employees and includes a 401(k)-style retirement plan instead of a fixed pension. The new workers will be hired for jobs such as material movement, maintenance and other jobs. The new workers will start at $14 to $14.61 an hour under the new agreement. The UAW agreed to divert 10 cents per quarter per worker of pay increases triggered by inflation to defray health-care costs. In return, the union promised active workers that they won't have to boost co-pays for their prescription drugs. GM agreed with the UAW to continue building current products at 16 U.S. assembly plants. For instance, the company's Lordstown, Ohio, assembly plant will continue building small cars, including an entirely new set of redesigned models starting in 2011. The automaker also agreed to build its Chevrolet Volt plug- in electric car at the Hamtramck, Michigan, plant that now builds Buick and Cadillac models, according to the summary. The UAW document didn't show additional products planned past 2012 at the Wilmington, Delaware, plant that makes the Saturn Sky and Pontiac Solstice sports car or at the Orion Township, Michigan, plant that makes the Pontiac G6 after 2013. The union said it will work with GM to identify products for two identified plants, based on the business environment. Nothing Lost ``Existing active members didn't give up anything they already had,'' said Kristin Dziczek, an analyst at the Center for Automotive Research in Ann Arbor, Michigan. ``Their base wage didn't change. They still have their health care. They've got product guarantees.'' The automaker pressed the UAW for concessions after $12.4 billion in losses for 2005 and 2006. U.S. automakers Ford Motor Co. and Chrysler LLC have been operating under an extension of the old contract as the union negotiated with GM. Gettelfinger said he will meet with union executives over the next two days to discuss which automaker will be the target of the next round of talks. To contact the reporters on this story: John Lippert in Detroit at [EMAIL PROTECTED] ; Bill Koenig in Southfield, Michigan, at [EMAIL PROTECTED]
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