GM, UAW reach tentative settlement

DETROIT -- The UAW and General Motors early yesterday announced a tentative contract agreement two days after the union launched it first national strike against GM in 37 years.

The four-year deal includes a comprehensive health care trust fund for UAW retirees and broad job guarantees for UAW workers in the U.S.

The settlement sparked a rally for GM stock on Wall Street, with shares up 9.36 percent to $37.64 a share by 4 p.m. EDT.

UAW President Ron Gettelfinger called an end to the strike that brought more than 80 GM manufacturing operations in North America and Canada to a halt. He said skilled trades would likely report for the first shift this morning with remaining production workers returning to the job for the afternoon shift.

The UAW has not yet indicated whether Ford Motor Co. or Chrysler LLC would be next up for contract negotiations, but Gettelfinger said in a radio interview he expects an agreement with the two automakers to follow the pattern set by the GM pact.

The UAW’s national contracts expired at midnight Sept. 14, a day after the UAW named GM its first target for negotiations. It struck GM at 11 a.m. Monday.

“I believe the strike was beneficial in bringing a quick end to the negotiations,” Gettelfinger said after a 4 a.m. news conference at UAW headquarters in Detroit.

The deal remains subject to a ratification vote by the UAW rank-and-file.

In its statement, GM said the agreement also is subject to approval by the courts, and a review of accounting issues by the U.S. Securities and Exchange Commission. A mid-contract agreement on health care coverage two years ago also was subject to approval in federal court.

Neither the UAW nor GM released details about the agreement. Gettelfinger said the health care trust would be strong enough to remain solvent for at least 80 years. It was unclear if the trust also would cover the UAW’s 73,000 active U.S. workers at GM.

Analysts said GM has agreed to finance the trust at 70 percent of its long-term liability, or $35.0 billion.

The agreement also includes job guarantees and new investment in products for U.S. plants.

The agreement includes a signing bonus and a provision that would allow temporary employees to be made permanent starting at their current wage of $18 per hour, said a source briefed on the details. Veteran production workers earn about $28 per hour.

The conversion of those temporary workers to permanent status at the lower wage institutes what is known as a tier-two wage structure.

Another source said new hires in janitorial and truck unloading will get a tier-two wage, while current workers performing those tasks will be grandfathered at the current rate until they retire. This allays a major concern at GM plants in Kansas City, Kan., Lordstown, Ohio, and Bowling Green, Ky., that the work would be contracted to outside vendors.

The UAW traditionally has balked at allowing the auto companies to pay different wages to union workers in the same plant.

The source said GM also plans to offer another early-retirement and buyout to workers. It won't be on the scale, however, of a buyout that saw nearly 35,000 take the package about a year ago.

Along with the signing bonus, the agreement calls for a wage increase of 3 percent in the second year, 4 percent in the second year and 3 percent in the third, the source said.

Gettelfinger said he thought in four years the UAW would have at least as many GM employees as it does today and maybe more based on projected cost savings to GM.

Typically, the UAW unveils details of tentative agreements to its local presidents first before releasing them to the media.

"There's no question this was one of the most complex and difficult bargaining sessions in the history of the GM/UAW relationship," GM CEO Rick Wagoner said in a prepared statement released just after 4 a.m.

"This agreement helps us close the fundamental competitive gaps that exist in our business," Wagoner said in the statement. "The projected competitive improvements in this agreement will allow us to maintain a strong manufacturing presence in the United States along with significant future investments."

UAW members at more than 80 GM plants and facilities had been on strike since 11 a.m. Monday, but the negotiations continued.

On Tuesday, Gettelfinger said the union first proposed the health care trust for retirees known as a Voluntary Employee Beneficiary Trust, or VEBA, during the 2005 mid-contract negotiations.

The trust will take more than $50 billion in long-term liabilities off GM’s balance sheet.