Detroit Free Press (Michigan), September 29, 2007, Saturday

Copyright 2007 Detroit Free Press
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Detroit Free Press (Michigan)

September 29, 2007, Saturday
METRO FINAL Edition

SECTION: NWS; NEWS; Pg. 1

HEADLINE: UAW CONTRACT: THE NUTS AND BOLTS; JOB OUTLOOK: ALL BUT 1 UNION PLANT GET PRODUCT COMMITMENTS HEALTH CARE TRUST: IT WOULD ENSURE BENEFITS DON'T CHANGE VOLT IN HAMTRAMCK: ELECTRIC-DRIVE VEHICLE TO LAUNCH IN 2010

BYLINE: KATIE MERX; Tim Higgins contributed

BODY:
UAW President Ron Gettelfinger played his hand on Friday, revealing a tentative agreement that he said includes vehicle-assembly commitments for the duration of the 4-year contract for all but one of General Motors Corp.'s UAW-represented assembly plants and allows active workers and retirees to keep their health care benefits.

Early in the week, it appeared GM had won everything it wanted and the UAW had little to show for it other than vague promises of "job security."

On Friday, Gettelfinger was able to point to a comprehensive list of product commitments - led by plans to launch the electric-drive Volt in Hamtramck - promises to "insource" assembly jobs and a commitment to make at least 3,000 temporary workers full-time GM employees.

The union's release of official highlights about the contract prompted some union members and analysts to reevalu-ate first impressions that were based on insider reports. The full language of the contract however, lists some of GM's "commitments" as "opportunities" to build vehicles. Two plants, for instance, have no products lined up to build beyond the current versions of those they are making.

After reviewing the UAW's summary, Erich Merkle, an auto analyst and industry forecaster at IRN Inc., said given everything we know to date the proposed contract seemed to make promises that GM can't afford to keep.

"I mean, the UAW negotiators, they did their job and got as much as they could for the worker, given the circum-stances, but you have to ask yourself, 'Is this truly going to make GM competitive long-term?' I think the VEBA is a great thing, but it doesn't kick in until 2010 and I think GM had to give up an awful lot to get it."

For GM, people familiar with the company's strategy have said, moving more than $50 billion in retiree health care cost liability to an independent trust, known as a voluntary employee beneficiary association, or VEBA - at a significant discount - and creating a lower-paid category of non-production workers, were the big pushes.

The UAW agreed to allow GM to transfer its retiree health cost obligation to an independent trust, to create a sec-ond-tier of wages and benefits for new hires into "non-core" jobs, to pay lump-sum annual bonuses in lieu of wage in-creases and to divert a portion of workers' cost-of-living allowances to help pay for health care. In exchange, the union extracted what it called product commitments that it said equal job security.

"We're pleased with the outcome, " Gettelfinger said. "That was the goal of the bargaining committee and Vice President Cal Rapson ... job security."

The UAW said GM will pay $29.9 billion in cash and other assets into the trust, which Gettelfinger assured his members will remain solvent for 80 years, regardless of GM's financial condition.

Startling revelation

It was the unprecedented, comprehensive list of long-term product commitments from GM that analysts found the most startling revelation.

Harley Shaiken, a labor expert from University of California-Berkeley, called the product commitment "unusually comprehensive" and said it would be an incentive to the union to do high-quality and productive work.

"That seems like, in many ways, the linchpin of the contract," Shaiken said. "By guaranteeing a product commit-ment at 16 out of 17 assembly plants it essentially says that a good number of these jobs will be there in four years."

According to the UAW highlights, the only UAW-represented assembly plant for which GM didn't commit a prod-uct plan is in Doraville, Ga. GM included plans to shutter that assembly plant in 2008 as part of its 2005 restructuring announcement.

David Cole, chairman for the Center of Automotive Research, said the commitments are "something Ron can show to his members that he won a big deal. Of course, the quid pro quo on that is a competitive cost structure."

People familiar with the full language of the tentative deal, say the agreement comes close to closing the gap be-tween the average wage-and-benefit rate GM pays its workers and the average rate Toyota pays its U.S. assembly workers.

The Center for Automotive Research estimates that the Detroit automakers spend an average of $63.65 an hour on hourly production, not counting its buyout and jobs bank costs, while Toyota spends an average of $47.50.

It's unclear what the new average will be once some current workers take buyouts and the company can hire new employees at the second-tier rate, which people familiar with the contract say averages about $27 per hour for wages and benefits.

A good example of the benefit of the new cost structure to the UAW can be seen in the commitment made for the Lordstown, Ohio, facility where GM will build new small cars, Cole said. The UAW reports in the 24-page highlights report on the contract, which it distributed to its local presidents and chairmen on Friday, that GM has committed to build new small cars in Lordstown.

Chris (Tiny) Sherwood, president of UAW local 652 in Lansing, said the company had originally planned to build those cars in Mexico. So the union counts those jobs as "insourced."

What the full text says

The promise to build them in the United States beginning as early as 2010 implies GM believes it will achieve ma-jor savings from contract, analysts said.

"There would be no chance of that if they didn't feel the plant would be competitive," Cole said.
According to the UAW highlights report, GM committed to build several new vehicles, including the Chevrolet Volt, at its Detroit/Hamtramck Assembly plant.

It promised to continue building the current generation of full-size pickups and SUVs, and to build the next genera-tion of those trucks, in Pontiac; Flint; Janesville, Wis., Ft. Wayne, Ind., and Arlington, Texas.

And it committed new generations of vehicles to its Cadillac and crossover SUV plants in Lansing.

But the full text of the contract actually lists two categories for future product planning, calling them allocations and product opportunities, with much of the planning for future and replacement products, including the Volt, falling in the "opportunity" category.

Additionally, in the full contract - known as the white book by members - there are plans to move assembly of the Pontiac Solstice and Saturn Sky to Bowling Green, Ky., from Wilmington, Del., in 2012 with no future allocation yet identified for Wilmington. Union officials are expected to present the deal to the UAW's 73,000 GM rank-and-file members next week, with a plan to conclude ratification votes on the agreement by Oct. 10.The UAW reports that GM has agreed not to close or dispose of any plant beyond those already identified. GM has already announced plans to close the St. Louis service parts operation, Livonia Powertrain and Massena Powertrain, the report said.

People familiar with GM's assembly plans called the detailed list unprecedented and full of new detail.

Arthur Wheaton, a labor expert from Cornell University, said the specificity of the agreement regarding future product demonstrates: "The UAW knows that their future is tied to future product."

'A capacity issue'

According to the highlights, for example, GM has committed to build the Pontiac G6 through 2013 in its Orion Township Assembly plant in Oakland County and to continue building its full-size trucks in five U.S. plants. The Orion plant is also listed as having "no future allocation" identified in the white book.

"That leaves Orion with a bit of a capacity issue," Merkle said, because the G6 is 3 years old and demand for the vehicle hasn't required the plant to run at full capacity already.
Additionally, he forecasts that demand for GM's full-size trucks will continue to diminish in light of increasing competition in that segment, potentially setting up those plants to operate at less-than-full capacity.

"People are taking these product commitments as being positive," Merkle said. "But honestly, I think GM needs to consolidate plants. ... I mean Godspeed, but you're going to have to hit it on the product side and start taking back mar-ket share for this plan to work. ... From an operational standpoint, I'm not that keen about it.

"The UAW knows that their future is tied to future product."Arthur Wheaton, a labor expert from Cornell University, talking about the specificity of the agreement regarding future products signifies

(SIDEBAR)
Contract highlights revealed
The UAW started selling its proposed new contract with General Motors to its members. Here are the new high-lights:
Plant security
16 of 17 UAW-GM factories secure through contract.
Retiree health
Retiree health care unchanged under GM through 2009.
Retiree health, continued
With almost $30 billion available, UAW projects lifetime benefits for all.
Worker health benefits
Active workers keep full health benefits, in exchange for cost-of-living diversion.
New members
GM agrees to shift 3,000 temps into permanent positions.
Two-tier wages
New hires get $14 to $15 per hour.
MAP: BUILDING THE FUTURE
The UAW says the tentative contract between the UAW and General Motors
Corp. features product commitments at 16 UAW assembly plants.
FLINT
. Trucks and cabs until 2011; next
generation in 2012
. Medium-duty trucks until 2008
PONTIAC
. Pick ups through 2011, next
generation starts in 2012
LANSING
. Cadillac CTS and STS sedans and SRX
crossover through 2009
. CTS wagon and CTS coupe in 2009
. New rear-wheel drive sedans start in
2011
LANSING/DELTA TWP.
. GMC, Saturn, Buick crossovers until
2011, next generation start in 2012
. New Chevy crossover starts in 2011
JANESVILLE, WISC.
. Trucks and SUVs until 2012; next
generation starts in 2013
. Medium duty trucks until 2009
WENTZVILLE, MO.
. Chevy and GMC large vans beyond
2012; next generation depends on
demand
FAIRFAX, KAN.
. Chevy Malibu and Saturn Aura until
2011
. Midsize Buick and Saturn models start
in 2009
. Chevy 4-door notchback starts in 2010
FORT WAYNE, IND.
. Pickups through
2011, next generation
starts in 2012
ORION
. Pontiac G6 through 2013
DETROIT/HAMTRAMCK
. Buick Lucerne and Cadillac DTS until
2010
. A small minivan, like the Opel Zafira,
starts in 2009
. Chevy Volt starts in 2010
. Midsize Chevy sedan starts in 2012
LORDSTOWN, OHIO
. Chevy Cobalt and Pontiac G5
through 2009
. 4-door midsize notchback in 2010
. Two smaller rear-wheel drive cars in
2011
WILMINGTON, DEL.
. Pontiac Solstice and Saturn Sky until
2012
BOWLING GREEN, KY.
. Chevy Corvette and Cadillac XLR until
2011; next generation starts 2012.
SPRING HILL, TENN.
. New Chevy crossover through 2012
and potential replacement after
. Next generation of small SUVs
SHREVEPORT, LA.
. Hummer H3 SUV, Chevy Colorado
and GMC Canyon pickups through
2011
. Adds Hummer H3 pickup before
2011
. Next generation Hummer H3 SUV
and H3 pick-up starting in 2011
ARLINGTON, TEXAS
. Trucks and SUVs, such as Chevy
Tahoe and GMC Yukon, until 2012;
next generation start 2013
Source: UAW-GM tentative contract summary
Contact KATIE MERX at 313-222-8762 or kmerx@freepress.com Business writer Tim Higgins contributed to this report.
ILLUSTRATION: Map Detroit Free Press;Photo

GRAPHIC: CAPTIONWRITER: BRIAN KAUFMAN / Detroit Free Press
MEMO: SIDEBAR ATTACHED;UAW CONTRACT DETAILS
DISCLAIMER: THIS ELECTRONIC VERSION MAY DIFFER SLIGHTLY FROM THE PRINTED ARTICLE
"We're pleased with the outcome, " says UAW President Ron Gettelfinger, holding a copy of UAW's summary of the tentative agreement with GM Friday during a news conference at the union's Solidarity House headquarters in Detroit.

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