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GM, Union Make Progress, Deal Seen Likely

Negotiators from General Motors and the United Auto Workers union were making significant progress on Saturday on a new labor contract, but major issues remained unresolved, a person close to the talks said.

GM and the UAW returned to the bargaining table in the morning for a third day of intensive talks aimed at clinching a contract for the largest U.S. automaker.

The union agreed to extend its now-expired labor contract with GM on an hour-to-hour basis late Friday night.

That move stoked expectations the two sides were nearing a deal after eight weeks of bargaining and avoided the threat of an imminent and potentially crippling strike.'

The early stages of the labor talks had focused on a complex plan to allow GM to cut billions of dollars in expenses for retiree health care by paying into a new UAW-aligned trust fund, people close to the talks have said.

By Saturday afternoon, some of the bargaining teams poring over other areas of the contract were making progress, according to the person close to the talks.

GM and UAW declined to comment on the talks, which will affect more than 73,000 hourly workers and almost 270,000 blue-collar retirees.

Five GM plants in the United States were operating on Saturday with more than 70 union-represented facilities set to go back into operation on Monday, GM representatives said.

The closely watched labor talks resumed at around 10 a.m. EDT on Saturday after a five-hour break that capped a marathon bargaining session. That session brought GM Chief Executive Rick Wagoner into direct negotiations with UAW chief Ron Gettelfinger for the first time.

Despite the signs of progress, the contract talks have taken some unexpected turns already.

After hitting an apparent snag in talks, the UAW on Thursday singled out GM as its "strike target," a term it had avoided in more collegial negotiations in 2003.

Rival automakers Ford Motor and privately held Chrysler quickly signed contract extensions with UAW, clearing the way for their union-represented workers to continue working.

Strike Seen Unlikely

Membership in the UAW has dropped to about 540,000, just over a third of its peak in 1969, reflecting the toll foreign competition has taken on U.S. automakers.

Despite its waning size and influence, the UAW has historically negotiated pay and benefit packages considered the gold standard for organized labor in a U.S. economy where less than 10 percent of all private workers remain unionized.

The Detroit-based automakers lost more than $15 billion in 2006 and have cut more than 80,000 jobs through buyouts driven by plant closings. Given the industry's weakness, analysts have viewed a strike as unlikely.

The last major UAW strike against GM was in 1998, when a 59-day walkout at two GM parts plants caused shortages that eventually shut down almost all of the automaker's assembly plants and caused sales to plummet.

GM never recovered its pre-strike U.S. market share of 31 percent and has lost about 7 percentage points since.

"We need to work together," said GM electrician Penny Shumaker, who was waiting for developments on Saturday outside a Flint, Mich. union hall. "GM is not the enemy -- Toyota is. They're the ones we have to watch out for."

Wall Street analysts have been optimistic GM would clinch a deal to slash health care costs totaling $4.8 billion in 2006.

The automaker, like other U.S. industrial companies and local governments, has struggled under the weight of its obligation to pay for increasingly expensive health care to a growing pool of retirees.

Facing health care costs rising at 10% or more, GM has offered the UAW a chance to take a large up-front payment that would set up a new trust fund in exchange for being cut free of the future responsibility for retiree care.

GM's unfunded liability for such costs has been estimated at over $50 billion.

GM and UAW have been sparring over how fully GM should be required to fund a special trust -- known as a voluntary employee beneficiary association, or VEBA -- in exchange for clearing that overhang from its balance sheet.

Two union officials familiar with the UAW's stance said the union sought a job security guarantee in exchange for acceptance of the VEBA.

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