UAW Offers Detroit Concessions

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UAW to Renegotiate Labor Terms, Modify Jobs Bank

The United Auto Workers union is willing to change its contract and will delay billions of dollars in payments to a union-run health care trust in an effort to help the struggling automakers.

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"It's not just the dealer," said Tammy Darvish, vice president of the chain of Darcars dealerships. "I have 233 local vendors that I do business with, and I pay them combined over $83 million a year. You have oil guys, messenger services who would be affected."

But lawmakers and analysts were still asking whether the three major U.S. automakers had plans to become viable or whether they would end up asking for even more money from taxpayers. A Goldman Sachs report issued yesterday took a more pessimistic view of GM's international sales than the company and said that GM might need even more than the $18 billion it allowed for in its worst-case scenario.

With cash shortages running so big, it was hard to see what could save the companies other than federal aid. Gregg Lemos-Stein, an auto expert at Standard & Poor's, noted that GM's total annual interest payments on its debt came to less than half the cash the company went through during the third quarter of this year alone.

"The cash losses are so severe that debt reduction alone can't be the entire solution," Lemos-Stein said.

Gettelfinger asserted that labor made up only 10 percent of the cost of a car. "To be honest with you right now, if a UAW membership went into these facilities and worked for nothing, according to our research department, it would not help the companies that much," he said.

UAW members numbered fewer than 150,000 at GM, Ford and Chrysler, down from about 300,000 five years ago, the union said.

Many critics of the auto industry have cited high labor costs. However, cutting those costs were at the heart of the last two contracts. Yesterday, Ford's Mulally called the 2007 UAW contract "transformational" because of the savings it generates.

"The word concessions, I used to cringe at that word," Gettelfinger said in his news conference yesterday. "But now, why hide from it? That's what we did."

According to Ford, by the time the contract expires in September 2011, hourly labor costs, including wages and benefits, would be $58, just $4 an hour more than foreign-owned companies with nonunion plants in the United States.

But that calculation assumed that the companies would be able to hire new workers at lower wages and that these new hires would make up about 20 percent of the companies' workforce. Because of the economic downturn, however, Ford said it hasn't hired any new workers and that the differential was currently about $9 an hour.

The 2007 contract also transferred the cost of retirees' health-care plans from the auto companies to an independent trust known as a voluntary employee beneficiary association, or VEBA.

The changes reduced the companies' liabilities for retiree health care by 50 percent, according to the UAW. In return, the companies promised to make huge lump-sum payments into the trusts to cover much of the retirees' plans. Ford, for instance, paid $2.7 billion into the VEBA in January. GM is due to make about a payment of about $7 billion in 2010. The companies want to defer future payments, and there might be enough money in the trusts to allow them to do so without affecting retiree benefits for some time.