GM, Chrysler Struggling to Strike UAW Deal

GM-made Cadillacs in storage in Newark. GM and Chrysler must present a viability plan to the government Tuesday.
GM-made Cadillacs in storage in Newark. GM and Chrysler must present a viability plan to the government Tuesday. (Daniel Acker -- Bloomberg News)

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By Kendra Marr and Peter Whoriskey
Washington Post Staff Writers
Saturday, February 14, 2009

General Motors and Chrysler are far from reaching a new labor pact with the United Auto Workers, making it unlikely they will secure an agreement before their Tuesday deadline for presenting a viability plan to the Obama administration.

The automakers so far have been unable to meet one of the government's key demands for assuring federal assistance: that they reduce autoworker compensations to levels competitive with foreign carmakers Honda, Nissan and Toyota. A union official said yesterday the two sides remain far apart in reaching an accord.

"Given the current state of things, it's quite clear that there won't be any agreement" by next week, said Alan Reuther, legislative director for the union.

Failure to negotiate concessions could jeopardize the government assistance, which would almost certainly force the companies into bankruptcy given the sharp decline in sales worldwide. But negotiators hope the Treasury Department has left the companies some wiggle room. In spelling out the terms of their respective loan agreements, the Treasury set targets -- such as cutting unsecured debt by two-thirds -- but it also told automakers to "use their best efforts" to achieve the concessions. Any deviation must come with an explanation why it would not jeopardize the company's long-term prosperity.

Further, Reuther contended that a literal reading of the agreement doesn't call for any labor pact to be struck until March 31, when he said automakers must show evidence of union approval in order to hang on to the loans.

"There does not have to be any agreement by February, as far as we're concerned," Reuther said. "We think the loan agreement requires the companies [on Tuesday] to come forward with their view on a reorganization plan."

Indeed, the automakers may have no choice. They have yet to finalize a whole host of agreements key to their future. While GM has cut salaries and offered a new round of union buyouts, the automaker has yet to reach an agreement with its bondholders on the terms of a debt-for-equity swap. And a Chrysler official said the company is unlikely to wrap up a partnership with Italian carmaker Fiat by Tuesday, or fashion other alliances needed to strengthen its business.

"There just isn't time," said David E. Cole, chairman of the Center for Automotive Research, an industry analysis firm.

Yesterday House Speaker Nancy Pelosi (D-Calif.) and Rep. Barney Frank (D-Mass.) sent letters to the top executives of the two companies, stressing the importance that they submit credible strategies.

"We trust that your restructuring plan will demonstrate to the world that you are willing to make the tough decisions to modernize your operations, restructure your debt, enhance your competitive status in the global marketplace, and protect American jobs for the future," they wrote.

The slow pace of negotiations has frustrated some lawmakers. Sen. Bob Corker (R-Tenn.) said the Treasury's terms lack the necessary threat to get stakeholders moving: restructure or face bankruptcy.

"As you drag this out, all you're doing is causing the company to get weaker, weaker, weaker," he said.

Chrysler's difficulties in nailing down details means it will be submitting two scenarios -- one that envisions a Fiat partnership, and one without, said people familiar with the matter who spoke on condition of anonymity because the details are not public.

GM bondholders, meanwhile, have been reluctant to agree to concessions until they know what the UAW is willing to give up, contending that the information is necessary to arrive at a value of the company, and hence their investments, according to people familiar with their deliberations.

"We're making progress, but there is by no means a deal," said a person familiar with the bondholder committee's thinking.

GM spokesman Tony Sapienza expressed optimism that the company would be able to meet the government's requirements.

"We are committed to submitting our rescue plan on the 17th as required by the terms of the bridge loan. We're working very aggressively to do that."

Reuther chastised bondholders for trying to force concessions on the union before taking any of their own.

"The UAW made deep concessions in 2005 and 2007. We feel like we are on third base," he said. "The bondholders still need to step up to the plate. Workers and retirees have already made huge sacrifices."

Reuther called GM's latest labor proposals non-starters, citing one proposal that would fund retiree health plans with company stock rather than cash, and another he said would take $1.5 billion away from active workers.

"We think that goes beyond anything that is necessary to make the company competitive," Reuther said.

Some analysts say the Obama administration's failure to quickly appoint a "car czar," the person who is supposed to oversee any restructuring, has muddled the government's ability to get things done.

"They don't have the big stick that says we need you to do this or else," said Tracy Handler, an auto analyst with IHS Global Insight.


© 2009 The Washington Post Company

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