KEY POINTS:
General Motors, trying to shed US$50 billion ($70 billion) in retiree medical obligations, has offered to cap United Auto Workers members' out-of-pocket costs to help gain approval for a union-run health fund, three sources with knowledge of the matter said.
GM, the biggest US carmaker, also proposed a freeze in cost-of-living raises and base wages in talks on a new four-year UAW contract, said the sources, who asked not to be identified.
Bargaining continued overnight, more than 48 hours after the old accord was due to expire.
The proposals, which may change as talks go on, are central to GM's bid for union approval to get rid of retiree healthcare liabilities that cost the firm up to US$3.3 billion in 2006. GM, Ford Motor and Chrysler are banking on expense cuts to help them survive after US$15 billion in combined losses last year.
"An agreement like this would give the UAW four years in which the nuclear options are off the table," said Dan Luria, an analyst at Michigan Manufacturing Technology Institute, referring to workers' concerns that they might have to pay more for healthcare coverage or lose it altogether.
GM and the UAW have agreed on the need for a so-called Voluntary Employee Beneficiary Association to take retiree healthcare obligations off company books, the sources said. GM would contribute about 60 per cent of the value of its current liability to start the programme, two of the sources said. The talks may still unravel if the two sides can't agree on these and other terms, they said.
The union hasn't ruled out the cost-of-living freeze, a GM demand that spurred a 67-day strike in 1970, two of the sources said. A new contract must be ratified by a majority of the more than 73,000 UAW members at GM.
The old GM contract, which was set to expire last week, continues to be extended hour by hour, GM spokeswoman Katie McBride said.
McBride declined to comment on the talks, which are being held at the UAW-GM training centre in Detroit.
"I just talked to my servicing rep a half hour ago," Chris Sherwood, president of UAW Local 652 at a Cadillac plant in Lansing, Michigan, said. "He said they're still going at it, that talks are progressing."
The New York Times reported on its website that the two sides may be nearing an impasse. The company and union disagreed over guarantees the UAW seeks for members who remain after GM completes a restructuring, it said.
The UAW chose GM as the focus of negotiations, naming the company as its "strike target". The union wants to reach an agreement with GM, then try to adapt the terms at Ford and Chrysler. Those carmakers agreed to operate under indefinite contract extensions while the GM talks continued. The contracts cover 180,681 active workers and 419,621 retirees and surviving spouses at GM, Ford and Chrysler. GM reported US$64 billion in future retiree healthcare obligations for union and non-union employees at the end of last year. The carmaker doesn't break out the union portion. The UAW share is about US$50 billion, sources familiar with the breakdown said.
GM and the other US carmakers estimate they pay US$25 to US$30 more an hour to workers than Toyota and Honda do at their US plants.
The employee association proposed by GM would include a "rainy-day" fund for additional GM contributions if medical costs rise more quickly than expected, the sources said. The association would also include a "windfall" provision in which the UAW would return some of GM's initial contribution if health-cost inflation is less than projected, or if the US Government enacts a national health plan that lowers the fund's medical costs, the sources said.
GM's offer of a cap on workers' healthcare costs would cover active UAW members as well as retirees, the sources said. GM proposed providing lump-sum bonuses for workers in return for the union's acceptance of a freeze in base wages, the sources said.
Such provisions increase the chances of rank-and-file UAW approval because they restrict cash workers would receive in the future rather than now, said Luria, who is based in Plymouth, Michigan.
Luria said the UAW may agree to a wage freeze in part because of concern that its GM contract may be too expensive for Ford, which lost US$12.6 billion last year.
-Bloomberg
