February 17, 2009 - UAW and Big Three Automakers, Detroit MI

UAW, Detroit 3 reach tentative deal

Just as General Motors Corp. and Chrysler LLC filed viability plans with the U.S. Treasury today, the UAW announced it has reached tentative agreements -- with some significant exceptions -- to modify its 2007 national labor contracts with the Detroit Three in order to help the companies survive a severe economic recession and meet the terms of their federal loans.

GM and Chrysler have received $13.4 billion in federal loans, while Ford Motor Co. -- which is relatively healthier, despite a record $14.6 billion loss in 2008 -- has not tapped any federal aid.

“The changes will help these companies face the extraordinarily difficult economic climate in which they operate,” UAW President Ron Gettelfinger said in a statement.

However, the tentative deal does not include agreement on a critical health care trust -- and no deal will be final until that final loose end is tied.

The UAW said negotiations over how to modify a retiree health care fund are ongoing. In its 2007 contract talks, the UAW agreed to manage and operate a health care fund for its retirees. The move took billions of dollars in liabilities off the balance sheets of the automakers.

Loan agreements reached between GM and Chrysler and the Bush administration called for the UAW to accept shares of stock instead of cash for a portion of the payments for that trust, known as a VEBA, but the UAW has signaled that it is objecting to those provisions.

Disagreements over how to fund that Voluntary Employees Beneficiary Association, or VEBA, was among the issues that caused talks between the UAW, Chrysler and GM to stop and restart several times over the past several days as the companies worked furiously to meet today’s deadline to craft viability plans required by $17.4 billion in government loans.

“The UAW is withholding the terms of the tentative understanding pending completion of the VEBA discussions and ratification of the agreements,” Gettelfinger said in his statement today.

Still, the announcement by the UAW today shows that the union and the companies are making significant progress.

Ford said in a statement today that if the UAW’s members ratify the tentative agreement, it will “help Ford operate through the current economic downturn without accessing a U.S. government bridge loan.”

Ford said its agreement, reached Sunday afternoon, includes modified provisions on labor costs, benefits and operating practices that allow Ford to reach competitive parity with foreign-owned automakers’ manufacturing operations in the United States.

Meanwhile, GM did not characterize the UAW talks as over in its report today and it signaled that several hurdles remain.

“As of February 17, the Company and the UAW have made significant progress on costs/work rules, which represent major steps in narrowing the competitive gap,” GM said in its report today. “However, these revisions do not achieve all of the labor cost savings comprehended in the Company's financial projections.”

GM plans to report its progress to the U.S. Secretary of Labor, which it said “must certify GM’s competitiveness relative to the U.S. transplants.”

“Management will continue to work with the UAW with regard to competitiveness, and will work on additional initiatives to ensure GM achieves the cost reductions and financial targets comprehended in the Plan,” the automaker said.

Furthermore, GM said it will continue negotiations with bondholders and with VEBA officials.

“With regard to both the VEBA and bondholder negotiations, while discussions and due diligence are underway, restructuring agreements have not yet been finalized with either party at this point,” GM said. “Negotiations will continue with the objective of achieving successful resolution of these matters no later than March 31, 2009.”

Original Story - Detroit Free Press

Update Story - February 18, 2009

VEBA not resolved in tentative UAW deals

Changes won't be final until it gets ironed out

Although the UAW said Tuesday that it has reached tentative deals with each of the Detroit Three to modify its 2007 labor contract, the union acknowledged that the largest, and most contentious, issue remains.

The tentative deal does not include an agreement on how to fund a critical health care trust -- commonly called a VEBA -- and no deal will be final until that gets worked out.

The UAW announced its tentative deals with the automakers just as General Motors Corp. and Chrysler LLC filed viability plans with the U.S. Treasury Department on Tuesday.

"The changes will help these companies face the extraordinarily difficult economic climate in which they operate," UAW President Ron Gettelfinger said in a statement.

However, Gettelfinger also said, "the UAW is withholding the terms of the tentative understanding pending completion of the VEBA discussions and ratification of the agreements."

In its 2007 contract talks, the UAW agreed to manage and operate the VEBA -- a health care fund for its retirees.

The move took billions of dollars in liabilities off the balance sheets of the automakers.

But loan agreements reached between GM and Chrysler and the Bush administration called for the UAW to accept shares of stock instead of cash for a portion of the payments for that trust, and the UAW has objected to those provisions.

Ford Motor Co. said in a statement Tuesday that if the UAW's members ratify the tentative agreement, it will "help Ford operate through the current economic downturn without accessing a U.S. government bridge loan," but also indicated its deal isn't final until an agreement on VEBA payments is reached.

GM did not characterize the UAW talks as being over either.

"As of February 17, the company and the UAW have made significant progress on costs/work rules, which represent major steps in narrowing the competitive gap," GM said in the plan it filed with the Treasury. "However, these revisions do not achieve all of the labor cost savings comprehended in the Company's financial projections."