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September 26, 2007
UAW and GM Reach Contract Agreement
From our "Well, that was quick" files, General Motors and the United Auto Workers have setttled their one day old strike by agreeing to an historic deal on retiree health benefits:
GM is carrying some $50 billion in unfunded retiree health obligations on its books, a liability that executives say has helped make the company less competitive against foreign manufacturers like Toyota. The Japanese auto giant is expected to supplant GM this year as the world's largest car maker. It appears that GM got what it needed most; a respite from having to pay for the rising cost of health benefits for their retured employees while the UAW was able to keep the benefit intact.
Under the agreement, responsibility for the retiree health plan will shift to a Voluntary Employees' Beneficiary Association managed by the union. Details about how the VEBA will be funded have not been disclosed. But it is expected to involve a one-time payment of as much as $35 billion by GM, providing the union with money to invest and to pay for retiree benefits while reducing the company's future expenses by billions of dollars. Creation of the retiree health trust is to be monitored by a judge and the Securities and Exchange Commission, according to GM's statement Wednesday morning.
And apparently, GM will also get some relief on wages:
The Detroit Free Press, citing unnamed sources familiar with the agreement, said the new agreement includes a two-tier wage scale in which new employees and those in designated "non-core" jobs will be paid less than skilled veterans. It includes no wage increases, but does provide lump sum bonuses. Workers at Ford and Chrysler are expected to negotiate similar agreements in the near future.