GM - UAW Talks Continue On

Tuesday 4:40 pm ET By

DETROIT September 16, 2003; Tom Brown writing for Reuters reporterd that General Motors Corp. was the last holdout in contract talks with the United Auto Workers on Tuesday after the union reached tentative deals with Ford Motor Co. and Chrysler that call for plant closings and thousands of job cuts.

An industry source close to the talks on Monday said the biggest remaining issue between the UAW and GM, the world's

largest automaker, involved operations at auto parts supplier Delphi Corp. a GM spinoff.

The Big Three's 1999 labor contract with the UAW, covering more than 760,000 current and retired workers and their spouses, expired on Sunday. Under terms of Delphi's spinoff in 2000, it is subject to GM contract terms in the 2003 deal as well.

"GM continues to negotiate," GM spokesman Pat Morrissey said on Tuesday without elaborating.

The labor talks come against a background of dwindling profits at the Big Three, slipping market share and record-high incentives. The Chrysler unit of DaimlerChrysler reported a surprising operating loss of $1.1 billion in the second quarter, and Ford has lost nearly $6.5 billion over the past two years. GM has been profitable, but its earnings have slumped.

"We believe a contract with steep labor concessions is the sign of a troubled core industry, not 'good news' for investors," Goldman Sachs analyst Gary Lapidus said in a research report.

UAW President Ron Gettelfinger late on Monday said the union reached the four-year deal with Ford. Ford Chairman and Chief Executive Bill Ford Jr. said the tentative contract dovetailed with his company's plans to close four U.S. plants and cut jobs to return to sustainable profitability.

"Certainly the turnaround plan doesn't hinge on this contract, but everything we've been doing has been building upon our turnaround plan. And yes, obviously, this fits into it, or we wouldn't have reached an agreement," Ford said at a news conference late Monday.

The Ford pact also included a tentative deal with Visteon Corp. a former Ford unit and still its largest auto parts supplier.

The union's deal with the Chrysler, announced just past a midnight deadline on Sunday, will allow the automaker to sell or close up to seven poorly performing U.S. auto parts plants over the next four years, and cut 9,000 or more jobs, sources familiar with the agreement told Reuters.

GM has not stated any objectives to cut jobs and capacity, but it also has several aging and inefficient assembly plants. GM also faces mounting pension and health care costs for its roughly 117,000 active workers and nearly 300,000 retired workers and their spouses covered under UAW contract.

Delphi is the leading auto parts supplier globally, and since its spinoff from GM, it has shipped thousands of manufacturing jobs overseas and become the leading private sector employer in Mexico.

LAY THE GROUND

GM shares closed 63 cents higher at $41.88 on the New York Stock Exchange (News - Websites). Ford shares ended 26 cents higher at $11.63, while DaimlerChrysler gained 47 cents to close at $38.20 on the NYSE.

The UAW had pressed to reach an agreement with all of the Big Three automakers by midnight on Sunday, when the last four-year contract expired. The contract was extended past the deadline as negotiations continued with Ford and GM.

Company and union sources close to the talks said the broader Big Three deal fell through due to last-minute haggling over deals that will determine the competitiveness and possible survival of U.S. automakers for years to come.

The Chrysler deal also calls for a doubling of blue-collar co-payments for prescription drugs, to about $10.50, and lower company contributions to the pension plans of hourly workers.

As a trade-off, the UAW won a $3,000 bonus for its rank-and-file members at Chrysler and unspecified pay increases over three years of the contract, sources close to the agreement said.

"I think the companies are coming out of it with a contract they can live with, but not with any major reductions in their employment costs," said analyst David Healy of Burnham Securities.

The UAW's Gettelfinger had made health care the centerpiece of his public comments on the negotiations, vowing no concessions on the generous benefits UAW members receive. On Saturday he said the union aimed to improve medical benefits for its 302,500 active workers and 475,230 retirees and family members.