“It’s confusion,” Gettelfinger told Automotive News last week, days before his bargaining team begins talks on contract concessions meant to keep the Detroit Three out of bankruptcy. “I don’t know who to ask questions of.”
The problem: Government loans made to General Motors and Chrysler require the companies to cut labor costs, change factory rules and provide equity—rather than cash—for half the funding of retiree health care trusts negotiated with the UAW in 2007.
Loan provisions also say a United Auto Workers strike would put the companies in default—another reminder to both sides that they must reach an agreement.
But Gettelfinger says that many of the loan demands are ambiguous, and nobody on the government side has said what the union is expected to do. And he doesn’t know whom to ask.
“But, having said that, we’re going to work our way through it and find out what it means,” he said. “The industry is too important for us to just say it’s too confusing and we can’t do anything about it.”
Gettelfinger is meeting with his bargaining teams in Detroit before starting contract talks. A GM spokesman said the company is talking daily with the UAW, but there is no start date for bargainers to meet across the table, said GM spokesman Tony Sapienza. Chrysler also has been talking regularly with the union but is not discussing details, said spokeswoman Mary Beth Halprin.
Although Ford Motor Co. has received no government loans, it likely would want workers to accept similar concessions.
In late December, President George W. Bush threw GM and Chrysler a financial lifeline after Republican senators in December scuttled a loan package requested by the Detroit Three. The companies had said they would run out of cash this quarter without the loans.
So far, GM and Chrysler each have received $4 billion of the total $17.4 billion loan package. But to get the rest and keep the loans from being called back, they have to restructure debt and operations to prove their long-term viability. The deadline for such proof is February 17.
Gettelfinger said key UAW staff have worked every day except Christmas to try to figure out what’s required and how the UAW can help.
Protecting the new retiree health care trusts is a top priority, he said. The federal loans demand that the UAW accept shares in the automakers instead of cash for half of the total funding of those trusts, known as voluntary employees’ beneficiary associations.
The VEBAs were created in the 2007 labor agreements to allow the Detroit Three to offload about $100 billion in future retiree health care liability for about 50 cents on the dollar.
Gettelfinger questions what the carmaker stocks could be worth in the future. GM’s common shares, for example, have fallen more than 90 percent to $4 in just the past 15 months.
In 2007, the union promised its more than 500,000 retired members and survivors that the funds would last at least 80 years. “The VEBA is a huge concern because we have a lot of retirees who made decisions based on it,” Gettelfinger said.
The loan package also requires the UAW to bring compensation and work rules in line with those at the Japanese transplants.
Competitive on both fronts
Gettelfinger argues that the UAW already is competitive on both fronts. As evidence, he noted that the Detroit Three dominated the 2008 Harbour Report list of most-efficient assembly plants in North America.
As part of the 2007 Detroit Three accords, the UAW dramatically reduced job classifications when union locals negotiated their local factory agreements.
Gettelfinger also said that when bonuses are counted, Toyota factory workers in Georgetown, Kentucky, earned higher wages in 2007 than UAW veteran workers.
Some experts peg transplant wages and benefits at about $45 an hour, compared with $55 for veteran UAW workers. But that gap will shrink when and if the Detroit Three can hire workers at a second-tier or new-hire wage of half the current $28 per hour. That second-tier compensation package was approved in the 2007 contract.
Gettelfinger declined to tip his hand on the UAW’s bargaining strategy. He said the union would try not to open the 2007 contracts, but it will bring any proposed changes to the rank and file for a vote.
Said Gettelfinger: “It’s confusion.”