Friday, June 17, 2005

Struggles at GM

UAW tells GM: Don't cut retiree health care

Union challenges the automaker's right to unilaterally reduce health care costs.

By Christine Tierney and Eric Mayne / The Detroit News

Tom Pidgeon / Bloomberg News In a statement, UAW President Ron Gettelfinger said, "It would be a huge mistake" for GM to take unilateral action on health care benefits. Error processing SSI file Comment on this story Send this story to a friend Get Home Delivery

The United Auto Workers, under mounting pressure to help General Motors Corp. cut its soaring health care costs, warned the automaker Thursday not to unilaterally cut benefits for workers or retirees.

With GM struggling to reduce its massive health care bill, totaling $5.6 billion this year, many of the company's 360,000 retired hourly workers are rattled by reports that the automaker believes it has the right to cut their benefits without an agreement with the union.

After losing $1.1 billion in the first quarter, GM is seeking health care cost reductions by June 30 and is frustrated with the pace of the UAW's cooperation. The union has refused GM's request to reopen their national contract to revise benefit terms.

It also has downplayed the June 30 deadline, but has offered some concessions and is willing to discuss ways to reduce costs, as part of its long-standing tradition of negotiating with the automaker.

Top UAW officials expressed a desire to continue the goodwill and cooperative labor-management relations that followed a 54-day strike in 1998.

"It would be a huge mistake for GM to throw all that away by taking any unilateral action on health care benefits or other matters covered by our national agreement," UAW President Ron Gettelfinger said Vice President Richard Shoemaker said in a joint statement Thursday.

"The UAW has a moral obligation to our active members and our retirees to do everything we can to protect their best interests."

The Wall Street Journal reported Thursday that UAW leaders said GM has warned it has the right to unilaterally cut retirees' health care benefits, which are not outlined as clearly as current workers' benefits.

UAW spokesman Paul Krell said he was unaware if GM had made such a threat but said the union "disagrees" that GM can act unilaterally.

The report worried GM retirees in Michigan. "If GM goes ahead with that, I hope the International (UAW) calls a strike," said Bud Miller, a St. John's resident who retired in 1994 after working at GM's Lansing Craft Centre plant. "They'd better knock the lard off the top of the ladder first."

In contrast, investors hope GM can break the deadlock with the UAW, possibly by taking action on its own.

"While we are not advocating doing so, we believe a strong case can be made that GM can unilaterally and immediately terminate health benefits for most retirees without fear of a legal strike," analyst Brian Johnson at Sanford C. Bernstein said in a recent report.

He estimates GM could save $4 billion to $5 billion annually by eliminating retirees' health care benefits -- or at least threaten such a possibility to push the UAW to be more accommodating. At the end of 2004, GM's financial obligations for existing and future retirees stood at $77 billion.

At GM's shareholder meeting last week, Chairman and CEO Rick Wagoner said the automaker's health care burden cost $1,500 per vehicle and wanted to reduce that by a third, or by around $2 billion a year.

But some analysts say GM is unlikely to get savings of that magnitude quickly.

After canvassing a half-dozen union local presidents, investment firm Deutsche Bank said the health care concessions offered by the union -- $240 per person annually -- are only one-tenth of the cost-sharing that GM is seeking.

"Our bottom line conclusion is that based on our conversations it appears that the UAW is willing to make small concessions now," Deutsche Bank said. "Meaningful concessions will take more time and will probably not be achievable until the 2007 contract."

The UAW's statement Thursday underscored that message.

"As we have said consistently, the UAW does not intend to reopen the UAW-GM National Agreement," Gettelfinger and Shoemaker said.

"We have been just as consistent in saying that we are willing to work with GM to find mutually agreeable ways to reduce costs in health care and other areas," they said.

"We recognize this process may not be moving as quickly as some people might like. But we firmly believe that it is far more important to do things the right way than to rush to meet unrealistic expectations."

Workers are divided on whether they should contribute more toward health care expenses, said Mike Belsito, financial secretary of Lansing-based UAW Local 652, whose members build GM's popular Cadillac models.

"Some guys go, 'Hey, if we need to pay a little bit, we understand that,'" he said. "Other guys are very radical. They're saying, 'Absolutely not. Not until we see some movement in the management structure.'"

Some workers are rankled by the multimillion-dollar compensation packages paid to top executives. Wagoner earned $4.8 million for 2004, although that was down 43 percent from his 2003 compensation.

"That's our biggest problem," Belsito said. "When we see bonuses of $5 million -- excuse me? You want to come after (our) guys?"

Many hourly workers point to the billions of dollars that GM spent on Fiat Auto -- $2.4 billion to take a stake in the Italian automaker and another $2 billion to get rid of any obligation to buy the remainder.

Meanwhile, some of GM's salaried workers, who pay a much greater share of their health care costs, accuse the union of intransigence. GM says its salaried workers pay 27 percent of their annual health care costs, compared with only 7 percent for hourly workers.

"It would be fair if they had the same burden we have," said Lawrence Hale, a retired engineer in Durand who worked for GM for 39 years. "If they keep fooling around, GM is going to declare bankruptcy and we won't have anything."

Labor expert Harley Shaiken of the University of California at Berkeley said "both sides want to see a more competitive General Motors. The danger is that pressing too aggressively to reopen health care, GM could jeopardize its broader relations with the union," Shaiken said.

Staff Writer Sharon Terlep and the Lansing State Journal contributed to this report. You can reach Eric Mayne at (313) 222-2443 or emayne@detnews.com.