GM-UAW reach deal to end strike

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Negotiators from the United Auto Workers union and General Motors reached a tentative agreement on a deal early Wednesday to end a two-day old strike by 73,000 workers, according to the union and the company.

Terms of the agreement were not immediately available, but the statement from the company said the deal does include the establishment of a union-controlled trust fund that will assume responsibility for future retiree health care costs from GM (Charts, Fortune 500), the nation’s No. 1 automaker.

The UAW strike at GM could be over as soon as Wednesday after the No. 1 automaker and union reached a tentative agreement.
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A look at the start of the UAW strike against GM Monday from CNN’s Ali Velshi reports.
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Getting agreement for that shift of costs, estimated at more than $50 billion, was the key bargaining goal of the talks for GM.

“There’s no question this was one of the most complex and difficult bargaining sessions in the history of the GM/UAW relationship,” said a statement from GM Chairman and CEO Rick Wagoner. “I’d like to thank UAW President Ron Gettelfinger, UAW Vice President Cal Rapson and their bargaining team for their leadership and hard work in negotiating the agreement.”

Gettelfinger announced the deal to a cheering crowd at UAW headquarters in Detroit just after 4 a.m. ET. He said the deal had been reached about 3:05 a.m. He termed the strike to be in recess, saying members could go back out if they vote “No” during the ratification process due to start this weekend.

But he said the tentative deal had the unanimous support of both the union’s leadership and its negotiating team and he expected no trouble winning ratification.

“I think our retirees will be exceptionally pleased with this contract,” Gettelfinger said. “For active members, there will be some changes. I think overall they will be very, very pleased with the outcome of these negotiations and the job security associated with it.”

Only active members vote on ratification of the contract.

Asked what he thought broke the logjam in negotiations, he responded “I would think it was 11 a.m. Monday,” which is the time that the strike started.

“We successfully resolved a lot of difficult issues,” said the union president. “We feel very good about this tentative agreement. I think the strike probably helped our side more than theirs.”

Shares of GM were up 6 percent in early Frankfurt trading following the announcement.

While Gettelfinger would not discuss any terms of the agreement, he had said in the early hours of the strike that the union was open to setting up the trust funds with assets provided by the company.

But Gettelfinger said Monday the union needed job guarantees for its members before it could agree to the cost savings sought by the company to return its operations to profitability.

The details of such guarantees, whether in the form of promises to invest in U.S. plants and build new vehicles at domestic plants, or the type of income guarantees that were were present in past contracts, were not immediately known.

The company said the shedding of retiree health care costs will be a major step in its effort to close the competitiveness gap with nonunion automakers such as Toyota Motor (Charts) and Honda Motor (Charts).

But it will not come cheap for GM. The automaker will have to come up with tens of billions of dollars of cash, stock and debt to cover those future costs.

Details of how much of each kind of asset it will place in the trust fund is another key detail that was not immediately available.

GM spokesman Tom Wickham said the plan was to try to restart production at the 80 plants and parts distribution centers that had been shutdown by the strike by the second shift of the day Wednesday. That shift starts in the afternoon at most locations.

Gettelfinger said some skilled trades people at the plants might be called in for at least part of the morning shifts in order to get the plants ready to resume operations.

“Depending on the notification process, we could be back within hours,” said UAW Local 652 President Chris “Tiny” Sherwood, just before the announcement, when asked about his 3,000 members returning to work at a GM plant in Lansing, Mich.

The quick restart of operations is important for the resumption of normal operations at GM. Its base of suppliers only have limited space to store the parts and components they have been producing for GM.

Without an agreement Wednesday, many of the suppliers’ production lines would have had to start shutting down.

Most analysts had been expecting the strike to be a short one, and there was general agreement that a short strike would have little impact on GM’s finances.

GM lost nearly $13 billion on its core North American operations in 2005 and 2006 combined. While that key business unit returned to the black in the second quarter, it had been expected to lose money once again for the full year in 2007, even without costs associated with the strike.

Next up for the union is talks with U.S. rivals Ford Motor (Charts, Fortune 500) and Chrysler LLC. More than 100,000 UAW members are still on the job at those two companies under contract extensions granted while the union concentrated on reaching a deal with GM.

Shares of Ford also gained 2.4 percent in Frankfurt trading following news of the GM deal.

Gettelfinger couldn’t say which of the other two companies the union would seek a deal with first, but he expected to be able to conclude negotiations with the other companies fairly quickly, using the GM deal as a pattern for those talks.

Just over 100,000 UAW members at those companies have stayed on the job during the GM strike under a contract extension granted just before their previous deals expired Sept. 14.

Those companies are likely to seek the same kind of relief from retiree health care. Between them, they on the hook for nearly $50 billion in such costs, according to estimates from Standard & Poor’s.

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