GM, UAW Make Strike-Ending Deal

It only took General Motors and the United Auto Workers a couple of days to settle what could have been a disastrous strike. In exchange for job and investment guarantees, GM will be able to remove the employee and ex-employee healthcare liability from its books, transferring it to a union-controlled trust fund that GM will establish. Analysts have used the word “landmark” to describe the settlement.

Like a great many US companies of any size, GM offers its workers healthcare benefits. This stemmed from the wage and price controls in World War II; basically, it was a way to pay workers more without boosting wages. Sixty years later, things look a lot different, and GM’s non-US competitors don’t have that kind of liability -- their workers have national healthcare. These healthcare benefits have become a competitive disadvantage. Indeed, the New York Times stated that the liability for the next 80 years is $55 billion.

What GM has agreed to do is set up a trust fund to be operated by the UAW with about $38 million or so in cash, stock and other assets. Return on investment over the next decades should cover the rest, and it’s up to the UAW to manage it. GM’s boss Rick Wagoner said, “This agreement helps us close the fundamental competitive gaps that exist in our business.”

The UAW has probably secured healthcare benefits for its members for a lifetime, along with the responsibility to operate responsibly the system that provides it. In addition, GM has agreed to continue current medical benefits for two years, invest in the US plants, and maintain current employment levels at around 73,000.

In Detroit, the UAW traditionally strikes against one of the US carmakers, cuts a deal that sets the terms for negotiations for the others, and goes on making cars. This means Ford and Chrysler could wind up kicking into the trust fund, investing more in US plants and giving employment guarantees. It will be a boon to the UAW, and it might just help America’s Big Three automakers remain Three, rather than Two, or One, or None.

© Copyright 2007 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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