DETROIT - General Motors Corp.'s shares rose to their highest point in three months yesterday as Wall Street decided that the United Auto Workers union is willing to give GM wiggle room on health care costs.
Optimism that the UAW and the world's largest automaker can reach an agreement on health care stemmed from a meeting Thursday in Detroit of top UAW officials and plant-level union leaders.
GM's shares rose $2.70, or 8.4 percent, to close at $34.51, well above the $26-$31 range where they had hovered for the past few months. More than 25.2 million shares changed hands, almost twice the daily average volume.
The stock price began to tumble in mid-March when the automaker said it would post a huge first-quarter loss. GM ended up losing $1.1 billion in the first quarter, its largest loss in 13 years. Then, last month, Standard & Poor's Corp. and Fitch Ratings downgraded GM debt to junk status.
The one event seemingly keeping GM shares up past $30 was the offer from corporate raider Kirk Kerkorian to buy 28 million shares at $31 each. That offer expired Tuesday, the same day GM Chief Executive Officer Rick Wagoner said the automaker would eliminate 25,000 U.S. manufacturing jobs by the end of 2008.
Analysts who cover the auto industry on Wall Street called the UAW meeting an "incremental positive" because it showed a willingness by the union to work with GM on health care, the automaker's fastest-rising cost.
"The fact that the UAW appears to be willing to negotiate and that some type of deadline has been set is an incremental positive," wrote Morgan Stanley auto analyst Stephen J. Girsky in a report to investors entitled, "UAW willing to negotiate on health care."
UAW Vice President Richard Shoemaker, who heads the union's GM departments, re- peated Thursday that the UAW won't reopen its four-year contract with the automaker, which expires in September 2007.
But local union officials said the UAW leadership agreed to negotiate or discuss ways to ease GM's health care burden within the current contract.
"We didn't vote to do anything. What we said is: We are behind Dick Shoemaker to discuss health care with GM. And I think we will probably give them some help within the contract, even though we don't think their problems are our fault," said Eldon J. Renaud, president of UAW Local 2164 in Bowling Green, Ky. who attended Thursday's meeting.
Renaud said the health care talks are expected to continue through the summer.
"I think we all know we have to help and can't let GM wither on the vine," said Renaud, whose members build the Chevrolet Corvette.
Modifying UAW retiree health benefits - one of GM's biggest costs - might be a big sticking point. GM says it will spend $5.6 billion on health care this year for its U.S. workers.
Renaud said he and other union leaders told the more than 100 UAW officials in attendance at the Detroit meeting that the health care of retirees should not be cut.
"Our retirees should not be forced to take cuts in their fixed income by taking cuts in health care," said Renaud, reading from his meeting notes.
"The UAW's comments are clearly a step in the right direction, and they would triangulate with the message sent by GM's CEO recently regarding being in 'intense discussions' with the UAW on health care," wrote auto analyst Himanshu Patel.