GM and UAW Reach Tentative Deal

This is from the Wall Street Journal

GM Reaches Deal With UAW

By MATTHEW DOLAN

General Motors late Friday night reached a tentative agreement with the United Auto Workers for a new, four-year labor contract, setting the stage for the union’s continuing negotiations with Ford Motor Co. and Chrysler Group LLC.

The new agreement will bring GM workers back to work from layoff status, create new jobs at the company and bring back jobs from overseas to car factories in the U.S., according to UAW President Bob King. The union claimed credit in the agreement for fighting back company effort to weaken workers’ health-care and retirement plans, as well as “improved profit sharing with far greater transparency than in the past,” the union said in a statement.

The GM-UAW accord was the first major labor pact for the U.S. auto industry since the government bailout of its two of its biggest companies. The new deal marks a milestone for both GM and the UAW after skeptics predicted Detroit’s auto industry wouldn’t—and critics said it shouldn’t—survive the historic downturn in U.S. vehicle sales in 2008 and GM’s bankruptcy filing in 2009.

“In these uncertain economic times for American workers and faced with the globalization of the economy, the UAW approached these negotiations with new strategies,” Mr. King said in a statement released just after 11 p.m. Friday.

In a statement that quickly followed, Cathy Clegg, GM’s vice president for labor relations, said, “We worked hard for a contract that recognizes the realities of today’s marketplace, enabling GM to continue to invest in U.S. manufacturing and provide good jobs to thousands of Americans.”

Since August 2009, GM has announced investments of over $5.1 billion and created or retained almost 13,000 jobs in its U.S. manufacturing plants, according to the company.

No specific details about the tentative agreement were released immediately.

The union’s local leaders and about 48,500 members at GM must still vote to ratify the contract crafted by their bargaining committee before it can take effect.

As the original, four-year contract was set to run out this month, the Detroit Three auto makers started formal UAW talks in late July, hoping to negotiate reduced health-care costs and to keep a lid on wages. They put forward an offer for profit-sharing programs that reward workers when the companies are profitable and allow them to reduce labor costs during lean times. The union sought wage and benefit increases as well as commitments from the auto makers to produce more models in their U.S. plants, which would secure and add union jobs.

“I think the union is trying to balance two tough issues. Members want job security and jobs for the future. They also want to share in the success of the company,” Harley Shaiken, a professor at the University of California Berkeley, said in an interview Friday

Separate negotiations continue between the union and Ford and Chrysler, who earlier agreed to extend their current contract during the talks.

The four-year tentative contract at GM will ripple far beyond the more than 112,000 hourly unionized workers at three auto makers, influencing contracts at U.S. auto-parts makers, which combined employ a larger work force. Gains and givebacks for workers on wages and benefits in the new contract will also be benchmarked by companies employing thousands more non-unionized workers at other U.S. auto plants.

With the UAW’s large stake in the company through its independent trust for retiree health care and part ownership by the U.S. government, GM was seen early on as the best choice for the union to establish a baseline contract to use in negotiations with the remaining Detroit auto makers. But union officials indicated that the requirements imposed as part of the government-led restructuring at GM also complicated the discussions between the union and car company.

Before the talks, many workers lost one of their most powerful bargaining weapons: the strike. As a condition of bankruptcy, UAW members pledged not to walk out at either GM or Chrysler through 2015.

Experts said that there was little intense pressure at the end to finish quickly because the parties agreed to an indefinite extension of talks. “There is no danger of a strike” at GM, said Art Schwartz, a retired labor-relations director for GM who serves the president of Labor and Economics Associates, a Detroit area consultants group.

Still, the UAW and GM faced tricky negotiations because the U.S. government holds a 26.5% stake and an independent trust set up to provide health care for retired auto workers owns 12.8% of the auto maker. As at Chrysler, GM and union are also mindful that auto makers were bailed out by U.S. taxpayers who may expect a quickly reached agreement with terms on par with nonunionized competitors.

Ford didn’t seek a bailout or bankruptcy protection. And its workers still have the right to strike the company.

GM is hardly the same auto maker that inked a comprehensive deal with the UAW four years ago. The company since then has shed thousands of auto workers and the union agreed to major concessions, including a no-strike clause, ending automatic pay raises and changing the funding system for retiree health care.

Rather than posting losses, GM has been reporting billions in profits from all corners of the world thanks to stronger prices for new cars and trucks, a cleaned up balance sheet and lower costs. In 2008, GM employed 62,000 UAW members. Today, 48,500 UAW members remain. The auto maker also has 15 fewer plants.

Progress at GM now rivals Ford’s robust turnaround. GM earned $4.7 billion in 2010, its first annual profit since 2004 and its best yearly performance since 1999. In the first half of this year, the auto maker made $5.7 billion. Chrysler’s finances have also improved but not with the same speed.

Despite the transformation, GM as well as other auto makers expect to be buffeted by the still-slugging global auto market. In 2007, auto makers sold 16 million cars and trucks in the U.S. This year, the car companies are on an annualized pace to sell about 12 million vehicles.

Attention will now turn to Ford and Chrysler. But no quick deal is expected at Chrysler where talks broke down late Wednesday. In an unusual move, Chrysler Chief Executive Sergio Marchionne expressed disappointment in a critical, two-page letter to the UAW’s Mr. King, calling for a weeklong extension in the negotiations. The union agreed to the extension.

Mr. Marchionne wrote that he would be going out of town on business, indicating that a deal would not be possible in the coming days without his participation. The union declined to comment on the letter this week.

One of the issues at Chrysler that has stalled talks is the union’s desire to raise entry-level wages, two people familiar with the discussions said Friday. The company would agree to such a move but only if the union agrees to offset the increase by paying more in health care costs, according to these people.

The dispute between the Auburn Hills, Mich.-based company and union comes as Mr. Marchionne focuses on melding Fiat SpA and Chrysler into one company that can compete globally rather than get mired in a union spat. But Mr. Marchionne must also wrestle with a union whose independent trust for retired auto workers’ health care still owns a 41% stake in Chrysler.

News was quieter at Ford, which on Tuesday extended its negotiations with the union. Those talks are expected to take longer because of workers’ expectations about Ford’s sizable profits since 2010 and the union’s ability to strike the company if an agreement cannot be sealed.

—Jeff Bennett contributed to this article.

Write to Matthew Dolan at matthew.dolan@wsj.com and Jeff Bennett at jeff.bennett@dowjones.com