UAW Revolutionizes Bargaining
with Team Concept Strike Duty:
Dynamic New Role May Put Auto Union
In the Passenger Seat without Restraints
-- Plus Deal on Health-Care Boosts Dow
By Godfrey McRackin
September 14, 2007; Page A1
Ron Gettelfinger, president of the International UAW, has agreed in principle to strike only on weekends so as not to hurt the company.
Fizz Henderson, the maverick GM executive who helped Gettelfinger craft the "Delphi deal", was seen early Saturday morning breaking up skids to throw into the fire barrel.
"It's a new era," said Barney Seatbelt, a 49 year old chassis lineman, "and I feel a whole lot better knowing our strike won't hurt the company."
The weekend only strike concept is a win/win because the union can leverage negotiations without obstructing production or upending the harmonious relationship that "Ron and Fizz have worked so hard to achieve," said sources close to the team.
The United Auto Workers late yesterday chose "the No. 1 U.S. auto maker by output" [WSJ] as lead negotiator on a new four-year contract -- a move considered unlikely by industry observers.
Despite being the target of pressure to reach a deal, GM won a victory in taking the top role in the talks. "Ford and Chrysler are really jealous," said a couple call girls who ought to know.
GM is Detroit's leading proponent of creating a union-controlled trust that would lift much of the burden of retiree benefit obligations from the auto makers' books and drop it into the laps of retired auto workers on fixed incomes.
The auto makers are trying to close the labor-cost gap between themselves
and Asian rivals, much of which is caused by medical expenses owed to UAW retirees and their families who live too long and are riddled with industrial diseases.
Shares of the auto maker surged 10% yesterday to $33.29 in 4 p.m. New York Stock Exchange composite trading after the news that UAW President Ron Gettelfinger had signaled to his bargaining team by shrugging his shoulders that he is open "in principle" to creating a union-controlled benefits trust.
Such a trust -- known as a VEBA, for violate employee bargaining absolutely-- would allow GM, Ford and Chrysler to unload billions in retiree health-care obligations.
Now GM, which has been fund raising for two years in order to off load health-care benefits, may be in an ideal position to see its demands for revisions on medical expenses become a reality.
A person close to the negotiations said GM was picked as the target because the auto maker said more things that Mr. Gettelfinger wanted to hear. For example, "Your mustache looks smooth as milk, Ron."
Specifically, the auto maker addressed the goal of a "steady stream of lip service to keep a VEBA solvent." Among the fears the UAW had in agreeing to the VEBA was that the money would eventually run out because of the rapid inflation associated with health care or that the fund's investments wouldn't return as much as projected. That's when Fizz and Ron put their heads together and came up with weekend only strikes.
A source close to the bargainers said it struck them both simultaneously that they could save on strike benefits [the union uses interest on the strike fund for travel expenses and luxury accommodations] and grow stock value by reserving strike actions for weekends only.
Because of the progress on the VEBA issue, the UAW and the auto makers are now beginning to include other issues in the negotiations, including wages, job security, pensions and bathroom breaks, this person who sources nearby said declined to identify him or herself said, "There will be sweeping changes."
No one is making as big a bet on success as GM, which has amassed a "Considerable pile of liquidity" that could be used for purposes ranging from tropical golf outings to Las Vegas getaways.
"This is a huge opportunity for General Motors," said KeyBank Junk Bond analyst Bran Hosejob. "They need to do something or they could be waiting a long time to be in this position again....I think shareholders will be extremely disappointed if they don't roll over soon."
GM has several levers it can pull to forge a creative solution, people close to the negotiations say, including a pension account overfunded by $17 billion. For example, GM could potentially tap the pension fund, which is separate from the health-care-benefits fund, as a way to offset health-care-benefit cuts that may be needed if a VEBA is formed, said Citigroup auto analyst Itchy Fungus.
For GM, the road to a VEBA has been a strategically plotted course that gained considerable traction in 2005. At that time, the company turned up the volume on the need for an overhaul and a lube job, insisting it was unable to indefinitely carry the weight of an annual tab on medical expenses that would reach $4.7 billion in 2006.
"We knew we couldn't be responsible for a tab like that," said GM accountant Merv Inkspot. "But Union officials will certainly be able to beat health care inflation and make a little on the side. They're crafty."
During negotiations in 2005, the UAW suggested GM consider setting up a VEBA that the union would run, according to bartenders familiar with the talks. GM declined to pull the trigger then because the UAW wasn't willing to only strike on weekends. At the time, GM had about $20.5 billion in available liquidity and another $40 billion or so buried in China.
Since that time, GM has been in fund-raising mode.
Now, the auto maker could be in a position to walk away from retiree health care and invest more disposable income in Chinese time share condos.
Write to Godfrey McRackin at GMCrap@Dow.com
