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The UAW's historic surrender at GM

October 5, 2007 | Page 14

LEE SUSTAR reports on the huge concessions in the UAW deal at GM.

THE UNITED Auto Workers' concessions to General Motors allow the company to shed $50 billion in obligations to pay retiree health care and destroy a 70-year tradition of equal pay for equal work with a new two-tier pay scale--all in exchange for a weak promise by GM to keep investing in U.S. plants.

The deal was finalized after a two-day strike that UAW rank-and-file dissidents and business analysts alike dismissed as an effort by UAW President Ron Gettelfinger to let off steam from the membership and position him to better sell the givebacks.

Even after decades of givebacks to the Detroit automakers, the proposed GM deal marks a radical break for the UAW.

If approved by members, GM will hand over $35 billion in stocks and other assets to a union-controlled Voluntary Employee Beneficiary Association (VEBA), a trust fund that will pay for retiree health care beginning in 2010. GM gets a 30 percent "discount" on its current obligations, which would leave the VEBA managers of the future scrambling to make up for both a $15 billion shortfall and future increases in health care costs, currently rising at a 10 percent clip.

The UAW has negotiated VEBAs in the past at engine maker Detroit Diesel and the heavy equipment makers Caterpillar and Case--and all ran out of money, eliminating retiree health care other than Medicare.

Nevertheless, the prospect of a vastly larger VEBA apparently won over UAW President Ron Gettelfinger, who said he first proposed such a deal to GM in 2005. "This is UAW, Inc.," said Gregg Shotwell, an activist in the Soldiers of Solidarity network, which is organizing opposition to the agreement. "Gettelfinger will be golfing with Pfizer and Kaiser," the pharmaceutical and health insurance companies.

The VEBA alone is a break from precedent, as a letter three former UAW regional directors explained.

"We believe it irresponsible by the parties to this negotiation to shift the burden of risk to the retired workers and their families and release General Motors from its commitment to the full and perpetual coverage of health care for the workers who built the wealth of the corporation in the first place," wrote Paul Schrade, Warren Davis and Jerry Tucker in an open letter to UAW members.

Business, however, is cheering the VEBA. As the Wall Street Journal headline put it, "Street Salivates Over VEBA Cash Pile."

If Ford and Chrysler reach a similar deal, the UAW's VEBA "presents an opportunity for investment advisers and money managers totaling upward of $66 billion," the article stated. "That pile of cash from the three companies, if managed as one fund, would rank among the 40 largest pension funds in the country...bringing in tens of millions of dollars in fees to its managers. It would be nearly twice as large as the Harvard University endowment, the nation's largest college endowment."

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THE VEBA is only the biggest of many other catastrophic concessions in the deal. The agreement allows GM to introduce permanent lower-tier pay for workers in so-called "non-core" positions, such as janitorial work, forklift driving and materials handling.

These jobs were popular among high-seniority workers, who bid on them in order to move away from high-pressure assembly line jobs. Now, under the proposed deal, workers newly hired in those jobs will make just $14 to $16 per hour, or about half the pay of current workers. The UAW estimates that there are about 16,000 such jobs held by union members at GM, out of a total of 73,000.

What's more, future hires will no longer be eligible for traditional retiree health care plans or pensions, but will receive a 401(k) retirement account instead. They will pay more for health care--with a $300 deductible for singles and $600 per families, plus 10 percent co-pays. They won't be eligible for dental coverage for three years or receive full vision coverage for five years. Nor will they be paid for the traditional Fourth of July weeklong auto industry shutdown.

Thousands of new hires won't even get these substandard benefits, though. The new contract allows GM to hire long-term temporary workers for one year, with no benefits at all (the proposed agreement would turn more than 3,000 temporary workers into full-timers--but at the lower tier).

Current workers will lose out, too. Base pay would be frozen. Instead of raises, workers would get a $3,000 signing bonus and annual lump-sum payments worth 3 percent, 4 percent and 3 percent of annual pay over the rest of the four-year deal. Most of the annual cost of living adjustment (COLA) would be diverted to pay for health care, which would put base pay at just 68 cents an hour higher in 2011 than today.

To speed the transition to the lower-paid workforce, GM is expected to offer an early retirement package, similar to the deals that slashed UAW jobs at the Big Three automakers by 40 percent--some 127,000 workers--since just 2003.

At GM, UAW jobs have declined from 350,000 in 1980 to about 246,000 in 1994 to today's total of 73,000. This radical downsizing occurred despite various "job security" guarantees in contracts negotiated over that same period.

If the proposed deal is approved, Shotwell said, high-seniority workers like him--in a "non-core" job at a GM parts warehouse--will "have a target on our backs. The company has an incentive to get rid of us and replace us with lower-tier workers. About 65 percent of GM workers are eligible for retirement in five years. A lot of people will be jumping off this sinking ship as fast as they can."

That transition, he said, sets the stage for the 2011 contract talks. "If, by then, GM doesn't have a majority of lower-tier workers, they'll hire a bunch of temps a few months before the contract, and they'll have the right to vote."

After negotiating for months over a complex deal, the UAW is giving workers only a few days to analyze the agreement before voting ends around October 10.

And the more workers find out, the less they like it. Many UAW members at a regional informational meeting in Memphis reportedly walked out when they learned that the previously desirable "non-core" jobs would pay at the lower tier.

The supposed sweetener in the deal is a specific commitment by GM to invest in 16 of 17 assembly plants. But the fine print allows GM to break that promise, depending on market conditions.

This agreement is designed by UAW leaders and GM to pressure workers into looking after their individual interests--rather than defying union leaders and upholding the UAW's traditions of solidarity and collective action.

The question now is whether the UAW's unprecedented surrender is too much for members to swallow.

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