Friday, March 18, 2005

GM seeks UAW help to ease financial burden

The union suspects the automaker wants to discuss slashing health care costs.

By Ed Garsten / The Detroit News

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DETROIT -- Now that General Motors Corp. has laid bare its dismal financial outlook for the year, the automaker is expected to call on the United Auto Workers union to dig deep to aid the company.

GM Chairman and CEO Rick Wagoner will have the opportunity to plead the automaker's case directly to UAW leaders during an annual meeting between the two groups April 14 in Dearborn.

In a notice distributed Thursday to UAW leaders at GM's U.S. plants, GM and the UAW said the meeting will "provide participants an update of what's going on in the auto industry." No other details were given.

Wagoner is expected to give the UAW a sobering assessment of the state of the company and the auto industry.

Along with Wagoner, UAW President Ron Gettelfinger, Vice President Richard Shoemaker, who heads the union's GM department, plant managers and human resources personnel are scheduled to attend.

At least one local union official said his membership is prepared to do its part to assist the automaker in cutting its onerous health care costs.

"We have a sneaky suspicion health care will be a big part of it," said Jim Kaster, president of UAW Local 1714 in Lordstown, Ohio.

But it may take more than goodwill and voluntary steps to pull GM out of the swoon that triggered the company to warn that it will lose about $850 million in the first quarter, its worst three-month loss since 1992.

GM also said its 2005 profits will come in as much as 80 percent below earlier projections.

GM's sudden profit warning this week continued to reverberate Thursday, with the automaker's shares tumbling a second straight day, by 66 cents, or 2.28 percent, to $28.35. Its shares sank 14 percent Wednesday to $29.01.

Even with GM's fortunes slipping, analysts doubt the automaker has the leverage to coax the union into reopening its current labor contract covering wages and benefits through September 2007. Under the existing pact, workers are scheduled to receive 2 percent raises this September and another 3 percent raise in 2006.

Such a move has only been done once before. In 1980, to prevent Chrysler Corp. from seeking bankruptcy protection and as part of a federal government loan guarantee, the UAW granted wage concessions to the automaker.

"GM hasn't shown enough of a hit to warrant a reopener," said Sean McAlinden, an economist and labor expert with the Center for Automotive Research in Ann Arbor. "The UAW is absolutely up to date as to how much of a financial difficulty GM is in. The question is whether the rank and file is convinced."

That doesn't mean the union won't be pressed to make some concessions. McAlinden said Wagoner is likely to ask the union to "either give up pennies and some wages or plants and people."

Local 1714's Kaster says workers are becoming acutely aware of the crisis and are being urged to take steps that will cut health care costs, including the purchase of generic drugs.

"We are trying to get the people in the plant to realize what's going on and go to a doctor that's not gouging the company," Kaster said. "Benefits reps are talking to people."

Health care costs have become a drain on the automaker. Last year, GM spent $5.2 billion on health care and expects to shell out $5.6 billion in 2005.

"We are going to continue to have ongoing conversations with the relative parties, particularly the UAW, and we're going to try to work with them," Wagoner said during a Wednesday conference call. "We can make a lot of progress through cooperation. People like Ron Gettelfinger and Dick Shoemaker have been good about discussing issues, but these are tough issues by nature."

David Cole, chairman of the Center for Automotive Research, said the UAW has no choice but to work with GM in solving its financial woes, not out of altruism, but out of the need to hang on to dwindling jobs.

"The union will come to the party on this one," Cole said. "If I'm a union member and this company could go over the falls ... my labor contract becomes lead -- it's gone."

If the UAW was to grant GM any concessions, Ford Motor Co. and DaimlerChrysler AG would almost certainly seek similar cuts.

Under terms of the current contract, GM is taking three plants out of production this year. An assembly plant in Baltimore, Md., is closing, while factories in Linden, N.J., and Lansing are being permanently idled with virtually no chance of receiving a new product to build.

But industry and financial analysts insist GM still has too many factory workers and plants. GM's current network of North American plants is enough to support 30 percent of annual U.S. car and truck sales. But GM's U.S. market share has steadily declined to 25 percent this year.

Because of plant closings and permanent production cuts, GM currently has 3,500 idled UAW workers that are still collecting 95 percent of their regular pay. To lower costs, analysts speculate GM could offer some of those workers early retirement.

Through February, GM sales are down 10 percent. Few of its newly launched vehicles have made an impact with consumers.

GM is chipping away at its massive operating costs by pressing suppliers for price breaks. This week, it eliminated merit raises for salaried workers and reduced the company match for employee retirement saving plans from 50 cents on the dollar to 20 cents.

But the national contract with the UAW gives U.S. automakers much less leverage with union-represented hourly workers, which means they must wait until they can negotiate a new pact in 2007 to forge a better deal.

You can reach Ed Garsten at (313) 223-3217 or egarsten@detnews.com.