The Buffalo News, Thursday, September 27, 2007

The Buffalo News, Thursday, September 27, 2007

GM pact saves jobs in tradeoff with UAW
General Motors would shed responsibility for $51 billion in future benefits, while jobs at U.S. plants would be preserved

By Fred O. Williams NEWS BUSINESS REPORTER
Updated: 09/27/07 7:42 AM

The proposed contract agreement reached Wednesday at GM — if approved by workers — is designed to save high-paying jobs at auto plants in the Buffalo area and throughout the United States.

At the heart of the deal is this tradeoff: General Motors offloads responsibility for $51 billion in future benefits, and preserves jobs at its U.S. plants in return.

The tentative deal is based on ideas that would have been called crazy until recently. Among them is a multibilliondollar trust fund, administered by the UAW, to pay workers’ health care when they retire.

“I think if it’s set up and run properly, it can work,” said Stuart Bochniarz, a millwright at GM’s Tonawanda Engine Plant. At age 44, the Lockport man is counting on keeping his GM job for another 20 years.

The 1,500 striking local workers began going back to their jobs at Tonawanda at 4 p.m. Wednesday, after the two-day strike ended at 4 a.m. Recalls also began at Delphi Corp. in Lockport, a GM supplier that had begun to slow production, threatening 2,200 production jobs.

“We were happy it didn’t go any longer than it did,” said Wallace Wedington, chairman of United Auto Workers Local 774 in Tonawanda. Work had returned to normal Wednesday afternoon, he said.

But the GM strike is officially in recess, not over. The tentative deal faces approval by 73,000 rank-and-file members in voting expected this weekend.

Radical as the deal is, observers and union officials expect it will win approval. The two-day strike shows that union negotiators pushed GM hard. Plus, a signing bonus of $3,000 per worker doesn’t hurt.

Changes this big would have been unthinkable if not for the crisis that cost the U.S. auto industry $15 billion in combined losses last year. Talks at Ford and Chrysler have been awaiting the outcome of the GM deal. Ford, employer of 1,000 UAW members at its parts plant in Hamburg, is expected to closely follow the GM deal.

Investors seemed to bet that the contract will go through, driving GM stock up $3.22, to $37.64 on Wednesday.

Will a cost-saving contract halt the decline of a U.S. industry battered by global forces?

GM worker Michael Houck of Alden said he hopes so. “Maybe in the next contract we’ll say ‘OK, you’re doing so good, how about giving us some raises?’ ”

In addition to the signing bonus, the four-year contract contains annual bonuses — instead of raises — that total 10 percent of pay. The one-time payments don’t increase base wages, holding overtime and other wage-linked compensation constant.

Both sides exited the talks claiming victory.

“This agreement helps us close the fundamental competitive gaps that exist in our business,” GM chief executive Rick Wagoner said. With lower costs, the company will invest significantly in the United States and maintain a “strong manufacturing presence,” he said.

UAW President Ron Gettelfinger said the union got the job guarantees it sought, without being specific. The details are officially secret until members vote, but the statements indicate that GM will make future vehicles in the U.S. instead of shifting production to Mexico, Korea and other low-wage markets.

Attrition in the auto industry has hit the UAW, and the Buffalo economy, hard. Locally, the UAW lost 6,500 members at auto plants from 2000 to 2005, a 45 percent drop, according to reports filed with the U.S. Department of Labor. Nationally the union’s membership has plunged by two-thirds since 1970.

The trust fund, or VEBA, for voluntary employees beneficiary association, would reportedly be funded for 70 percent of its future liability by GM. It will have sufficient backing to pay out benefits for 80 years, Gettelfinger said.

That means it will save GM billions in expected costs, while giving the UAW firmer control of future benefits. Even if GM should go bankrupt, some level of benefit funding would be locked in.

“From the UAW’s perspective, I’d rather have $35 billion guaranteed than a promise of $51 [billion],” said Arthur Wheaton, instructor at the Cornell University School of Industrial and Labor Relations.

Still, questions surround how much the deal saves GM, and how the fund is structured. Some of the funding will come from GM’s over-funded pension plan, according to reports.

“I don’t like that at all,” GM worker Houck said. Other members said that making the UAW responsible for benefits will increase divisions within the ranks.

If approved, the deal will leave GM free to turn to an increasingly cloudy automotive market. It entered the talks seeking to cut what it says is a $25 hourly premium in its labor costs — wages and benefits — compared with those of foreignbased competitors operating in the U.S. But its sales are under pressure from high gas prices and a bumpy economy, as well as from Japanese “transplants.”

Among the most exposed vehicles are the large trucks and SUVs that GM counts on for operating profit. And the possibility of increased federal fuel economy standards adds to the uncertainty.

“No job is safe,” Wheaton said, “if GM can’t figure out how to sell more cars in the market or make money on them.”