GM Deal Advances but Dissenters Persist
Thursday, October 4, 2007
Critics of a tentative labor contract between General Motors and the United Auto Workers are stepping up a long-shot bid to derail the agreement, even as some GM workers began voting to ratify the deal.
In the coming days, about 73,000 GM workers are set to vote on the agreement, which was reached Sept. 26 after a two-day strike. A UAW local in Lansing, Mich., said yesterday that more than 80 percent of its voting members favored the deal. Last week, the agreement won unanimous support from union local presidents and plant chairmen.
Opponents are focusing on financial and legal risks associated with a $35 billion health-care trust fund for retired workers. Additionally, some UAW members said discontent is widespread over changes to plant work rules.
On Saturday, in Memphis, regional UAW leaders from California, Texas and southeastern states met to get details of the contract. According to one of the participants, who spoke on condition of anonymity because of the touchy nature of the proceedings, the crowd grew rowdy when the work-rules part of the contract was explained. Dozens of people walked out.
Under the agreement, GM would pay as little as $14 an hour to new employees in non-manufacturing jobs that once paid as much as $28 as hour. Older workers often sought such jobs, which are generally less physically demanding than assembly-line work. Some workers now feel they have nowhere to go as they age. "In my 28 years working for General Motors, this is the most negative reaction to a contract I've ever seen," said Todd Seguin, 47, who is on the executive board of UAW Local 1853 in Spring Hill, Tenn. "People are very unhappy."
It is not clear what affect such concern is having on ratification. Local union presidents say the rank-and-file appear to be won over by job-security guarantees. The union won GM assurances that new vehicle projects will flow into existing U.S. plants. For example, GM workers in Fairfax, Kan., where the Chevrolet Malibu is built, won a commitment from GM to build vehicles at the facility through 2015. Members there began voting on the contract yesterday.
"I think there is a good chance it will pass," said Jeff Manning, president of UAW Local 31, which covers Fairfax. "Hopefully, they will understand there is job security."
Harley Shaiken, a professor at the University of California at Berkeley who specializes in labor issues, said discontent over the contract had to be put in a larger context. "What the UAW is looking for a solid ratification, not necessarily unanimous acceptance," he said.
Under the contract, GM and the UAW agreed to shift billions of dollars in retiree health-care obligations from GM's books to a union-controlled trust. GM agreed to pay about $35 billion into the trust.
Opponents are focusing on the legal and financial risks associated with a $4.4 billion convertible note used to finance the trust.
A group of former UAW board members tapped Stephen F. Diamond, an associate professor at the Santa Clara University School of Law, to analyze the fund.
Diamond criticized the convertible note because he said it ties the fund too heavily to GM's stock price, carries too many restrictions and fails to protect health-care benefits in the event of a GM bankruptcy. In raising support for the deal, UAW President Ronald A. Gettelfinger stressed that a health-care trust would protect benefits for retirees of a company that went under.
Diamond said scrutiny of the $4.4 billion convertible note is important because the note represents the most significant asset in the fund until GM is scheduled to contribute billions more dollars over the next few years.
Diamond said the risk isn't being adequately disclosed to UAW members before the ratification vote, which he said could violate federal and state laws that cover the distribution and sale of financial securities.
The UAW declined to comment about the opposition to the contract provisions. At GM, spokesman Dan Flores also declined to comment.
Lawrence E. Mitchell, a law professor at George Washington University and the author of "The Speculation Economy," said that under the best scenario, assets in the fund would be more diversified, and not so heavily tied to GM in the form of the note.
"The note is a little reminiscent of the way Enron employees were encouraged to put their pension money into Enron stock," Mitchell said. "If this were Google, I might say relax. But it's not Google, it's GM."
The status quo entails risk, too, Mitchell said. Gettelfinger has argued that the union has no legal mechanism to force GM to pay retiree health-care benefits if the automaker became insolvent. "The workers are in a position where nothing they do is risk-free," Mitchell said. "You can't escape risk. It's a matter of picking your poison."