General Motorsand Ford Motor began talks with the United Auto Workers union Monday, hoping to win sweeping concessions that would slash labor costs for the struggling auto industry.
They insist they need major cost reductions, particularly in health care, to keep manufacturing jobs in the U.S. and to return to profitability.
The three Detroit-based automakers, including Chrysler Group, which is being spun off by German parent DaimlerChrysler in a $7.4 billion deal, lost more than $15 billion on a combined basis last year.
The health care issue looms especially large for GM, which last year spent $4.8 billion on insurance and medical care for its workers and retirees.
GM Chief Executive Rick Wagoner shook hands with UAW President Ron Gettelfinger at GM's negotiating headquarters in a staged event Monday morning to mark the formal start of talks that have been underway for weeks.
Neither side took questions from reporters. A similar event was set at Ford's Dearborn, Mich., headquarters for Monday afternoon.
The UAW's current four-year contract all three automakers expires Sept. 14.
About 100 GM retirees protested outside as the talks began, a gesture intended to encourage the UAW to hold the line against giving back more on retiree health care.
Many analysts expect the talks to include proposals to establish a union-operated trust fund for retiree health care, if both sides can agree on how fully to offset liabilities estimated at nearly $100 billion.
In a move that remains controversial with some retirees, GM and Ford won concessions in 2005 that shifted some health-care costs to their roughly 365,000 retirees.
That agreement cut GM's annual health-care bill by about $1 billion, but analysts cautioned the savings will be eaten away by spiraling health-care costs, absent further concessions.
Chrysler Group kicked off its negotiations with the UAW Friday.
The Detroit-based automakers have been losing market share to Japanese rivals led by Toyota Motor in the U.S. market -- historically their largest and most profitable.
On a combined basis, the market share for Detroit automakers was just above 50 percent of total industry sales for June, and could dip below that threshold for the first time this year as the automakers cut capacity and reduce low-margin sales to car rental agencies.
In response to the downturn, GM, Ford and Chrysler have cut about 80,000 factory jobs over the past two years.
GM's hourly labor costs at $73.26 and Ford's at $70.51 are about $30 higher than those of their Japanese rivals operating U.S. plants, according to data compiled by the automakers.
Much of that gap represents the cost of higher pensions and retiree health-care costs, according to the automakers.