Unsettled issues may extend talks with UAW, Big 3

UAW leaders are pushing for job security for Lordstown workers.

DETROIT (AP) — Contract talks between the United Auto Workers and the Detroit Three could run beyond a Friday deadline because so many issues are unsettled, including the companies’ desire to pay the union to take over retiree health care, a person briefed on the bargaining said.

General Motors Corp., Ford Motor Co. and Chrysler LLC have proposed making lump-sum payments to the UAW in exchange for being relieved of liability for much of their collective $90 billion in unfunded long-term retiree health care costs. The union would then set up trust funds to pay all future costs from those funds and investment income.

In return, experts say the union likely will try for job security and new products for plants, including GM’s plants in Lordstown.

At the Lordstown factory, workers are negotiating local issues with the plant’s managers and hoping that union bargainers in Detroit can win a commitment to build a new car model at the plant. Their current products, the Chevrolet Cobalt and Pontiac G5 small cars, go out of production after the 2009 model year, and GM hasn’t assigned the plant a new vehicle.

“I know they are looking out for the entire industry, not just Lordstown,” said Jim Graham, president of one of the UAW locals at the sprawling complex.

Issue trade-offs

Harley Shaiken, a professor at the University of California-Berkeley who specializes in labor issues, said the UAW likely will try to trade job security for the trusts, provided the companies offer enough to fund the health care benefits. The union likely would seek guarantees of new products for U.S. factories in return, he said.

Getting new products for Lordstown and perhaps Ford’s Louisville, Ky., sport utility vehicle assembly plant likely would be at the top of the union’s list.

“What’s critical for the union is the context that says if we help make the companies more competitive, we want to make sure that results in jobs at the end of the line, not in more outsourcing,” he said.

GM and Ford are pushing hard for the trusts, referred to as Voluntary Employees Beneficiary Associations, which would move a huge obligation off their books and bolster their credit ratings and stock prices. Chrysler also is interested in such a deal, but to a lesser degree since its new private equity owners, Cerberus Capital Management, would prefer to spend the automaker’s limited cash reserves on an overhaul of operations.

Taking on the retiree health-care costs makes sense for the union given the companies’ fragile finances, Shaiken said. They lost a combined $15 billion last year, and Ford has mortgaged its factories to stay afloat.

“This is an older work force. It’s a work force that understands the risks,” he said. “They understand that if one or more of these companies goes off a cliff, the health care goes with it.”

David Cole, chairman of the Center for Automotive Research in Ann Arbor, said the companies would be willing to trade future jobs for the trusts because they are so important to the automakers’ financial health.

The companies, according to Cole, are willing to pay the union 65 percent to 70 percent of the total obligation to take on the costs. Payments could be in cash or stock, although the union has been against taking equity in the past, he said.

The 65 percent to 70 percent figure might be low, though. The UAW recently agreed to a trust with parts supplier Dana Corp. in which the company paid about 78 cents on the dollar.