CHICAGO -- The United Auto Workers' tentative contract with General Motors Corp. includes unprecedented promises to secure the jobs of thousands of workers for years, while requiring GM to pay out at least $35 billion in health care benefits and establishing a new pay tier for thousands of new workers, according to the UAW.
Yesterday, local labor leaders endorsed the contract, which includes promises from GM to build current and new models at 16 U.S. assembly plants.
The deal is subject to ratification by GM's 73,000 UAW workers, which should be completed by Oct. 10, officials said. Still, the endorsement by the labor leaders was seen as a promising sign and union and GM executives alike praised the deal for helping both sides.
UAW President Ron Gettelfinger said the agreement provides "unprecedented product guarantees" and a "total moratorium on outsourcing" jobs.
Beside the plant guarantees, the union also confirmed that workers would not receive wage increases but would instead get a $3,000 signing bonus and bonuses equal to 3 percent, 4 percent and 3 percent of their annual pay in the second, third and fourth years of the deal. They would also receive 73 cents per hour in cost-of-living adjustments over four years, some of which will be diverted to health care benefits.
GM would lower labor costs by paying new hires for "noncore" jobs, those not directly related to production, $14 to $16.23 per hour to start.
New hires also would receive fewer health care benefits and be in a 401(k) retirement plan instead of a company-paid pension.
Many union members oppose such a two-tier wage structure, but workers on the lower rungs would be able to move up to assembly and skilled-trades jobs that pay $28 to $32 an hour as more senior workers retire, a person familiar with the contact said.
Noncore jobs would include janitorial, lawn maintenance, material handling and others that aren't directly involved with vehicle production and assembly.
About 3,000 temporary workers who now make $18 an hour will get permanent jobs at the full-time wage of $28.
A key element of the contract is the shift of GM's $50 billion retiree health care liability to a union-managed trust called a voluntary employees beneficiary association, or VEBA.
Benefits in 2010
The UAW said yesterday that GM would give the union $29.9 billion initially, and if health care costs exceed the fund's assets, it would contribute a total of up to $1.6 billion more over the next 20 years.
The VEBA would not provide benefits until 2010. Until then, GM would fund retiree benefits at a projected cost of $5.4 billion.
GM had been pushing hard to shift the health care burden of tens of thousands of retirees onto the union, saying that trimming the cost would make the company more competitive with lower-cost Asian automakers.
The UAW released information on the contract after local presidents unanimously approved it in a closed meeting in Detroit. The presidents will present highlights to the rank-and-file beginning this weekend.
"It's a fantastic contract," said a pumped-up Dave Green, president of Local 1714 in Lordstown, Ohio. "It looks like some new work is coming to Lordstown."
The UAW's announcement was unusual in that it spells out much of GM's product plans over the next several years, something automakers try to keep confidential. A GM executive said the company reluctantly agreed to release the information "for the benefit of the ratification," hoping it would help the UAW persuade members to approve the contract.
"It's an agreement that will help the company be more profitable, and it helps preserve our jobs and middle-class America," Green said. However, Harley Shaiken, a University of California, Berkeley labor expert, sees the lack of annual wage increases angering some UAW members. Still, he said, it may put GM in a better position to give raises in future contracts.
"Right now, GM is unstable and the economy is wobbly. GM could be a more profitable, more competitive company four years from now," he said.
GM's promise to keep U.S. plants open removes the fear those jobs will go to Mexico or other lower-cost countries, Shaiken added.
"Without that commitment, you could have the best contract in the world and they could still ship those jobs elsewhere," he said.
Some workers have expressed misgivings about putting retiree health care in a VEBA fund, which hands the union the risk of managing soaring costs, but Green said members won't lose benefits under it. "In fact, I think it's going to help retain benefits," he said. "I feel much more comfortable with the union handling my benefits than the company."
The UAW now turns its attention to Ford Motor Co. and Chrysler LLC. Gettelfinger said its negotiating committees would meet Monday to map strategy for talks with Ford and Chrysler.
Rick Popely writes for the Chicago Tribune.