UAW Reaches Tentative Contract Agreement With Chrysler; GM Rank-and-File Members Ratify Contract

Main Category: Health Insurance / Medical Insurance
Also Included In: Seniors / Aging
Article Date: 12 Oct 2007 - 5:00 PDT

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United Auto Workers on Wednesday ended a six-hour strike against Chrysler Group when the two sides reached a tentative contract agreement that would establish a voluntary employees' beneficiary association to assume Chrysler's retiree health care liabilities, the Detroit News reports. Chrysler President Tom LaSorda in a statement said that the agreement includes a "memorandum of understanding" to create a VEBA managed by UAW that would transfer $18 billion in retiree health care liabilities for 78,000 former Chrysler employees and spouses.

The News reports that the level of funding Chrysler will contribute to the VEBA was not disclosed (Vlasic/Hurst, Detroit News, 10/11). People close to the talks said that Chrysler will contribute $11 billion to the VEBA, about 60% of the company's retiree health care liabilities, according to Bloomberg (Lippert, Bloomberg, 10/11).

Chrysler went into the talks with the intention of winning health care concessions given to General Motors and Ford Motor in 2005, which are valued at $340 million a year for the automaker (Detroit News, 10/11). Bloomberg reports that people with knowledge of the negotiations said that Chrysler won the concession and that UAW would divert $1 per hour in future inflation pay increases to health care (Bloomberg, 10/11).

According to people briefed on the agreement, it would include a $3,000 signing bonus and 3% or 4% lump-sum bonuses in the last three years of the contract. It also would create a two-tier pay system for noncore jobs. A sticking point of the negotiations was job security, which caused the walkout, according to the Detroit Free Press. Chrysler at 4 p.m. made an offer to spare certain jobs, which sealed the tentative deal, sources said (Higgins, Detroit Free Press, 10/11).

Next Steps
UAW will bring its national Chrysler council together in Detroit to discuss terms of the agreement and approve the plan, which is the first step the union must take before bringing the contract to its 45,000 rank-and-file members for ratification. There is no date set for the meeting, according to the Free Press (Higgins, Detroit Free Press, 10/11).

The Chrysler negotiations were unique because Cerberus Capital Management, the new owner of the automaker, has put "enormous pressure on ... LaSorda to deliver a contract that expedites Chrysler's recovery after a substantial loss in 2006," according to the Wall Street Journal (Stoll/Valcourt, Wall Street Journal, 10/11).

David Gregory, a labor relations expert at St. John's University School of Law, said that UAW President Ron Gettelfinger used the walkout to send "a signal to the Cerberus new management that he expects a fair relationship and that he wouldn't be afraid to go out" on a strike (Maynard, New York Times, 10/11).

GM Rank-and-File Members Approve Contract
Also on Wednesday, GM and UAW said that their contract has been ratified by a majority of rank-and-file union members, the News reports (Detroit News, 10/11). UAW said that the contract was approved by 66% of production workers and 64% of skilled trades workers (Krisher/Durbin, AP/Contra Costa Times, 10/11).

GM will file a report on the contract with the Securities and Exchange Commission within four days and will hold a media conference call on Monday to discuss terms of the contract, according to the Free Press.

Gettelfinger said, "We entered these negotiations with a clear mandate from our membership. With their help and solidarity, we were able to achieve our goals. We protected jobs, wages and benefits for both active and retired GM workers -- and we helped protect middle-class manufacturing jobs in communities throughout the United States" (Merx, Detroit Free Press, 10/11).

Ford Negotiations Up Next
UAW's negotiations with the Big Three now turn to Ford, the "most troubled automaker and the least capable of absorbing a strike," the Free Press reports. Experts say that because of its financial problems, Ford needs a "special concessionary, flexible deal" from UAW, but that is "just the kind of deal that might put the two sides at odds," according to the Free Press (Webster, Detroit Free Press, 10/11).

Wall Street analysts believe the Chrysler deal could give a "glimpse of what kind of flexibility to expect from the UAW's negotiations with Ford," according to the Journal (Wall Street Journal, 10/11). As happened with GM and Chrysler, a person close to the talks on Wednesday said that Ford and UAW already have hit a sticking point on job security. Sean McAlinden, chief economist at the Center for Automotive Research, said that Ford and UAW might not be far apart on terms of an agreement and "might have gotten most of it done last week" (Webster, Detroit Free Press, 10/11).

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