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DETROIT - General Motors and Ford Motor have begun talks with the United Auto Workers union, hoping to win sweeping concessions that would slash labour costs for the struggling auto industry.
The automakers insist they need major cost reductions, particularly in health care, to keep manufacturing jobs in the United States and return to profitability.
The three Detroit-based automakers, including Chrysler, which is being spun off by German parent DaimlerChrysler, lost more than US$15 billion ($18.85 billion) combined last year.
Analysts and industry experts have cautioned that concessions that fall short of sweeping changes would likely lead to the collapse of at least one of the automakers.
"From our perspective, a contract that is incremental would be a real problem and would cause a failure of at least one of the companies," Dave Cole, chairman of the Centre for Automotive Research, an industry research group, said in an interview. "This contract has to be transformational."
GM Chief Executive Rick Wagoner and UAW President Ron Gettelfinger shook hands at GM's negotiating headquarters in Detroit Monday morning at the formal start of talks that have been under way for weeks.
At Ford's Dearborn, Michigan, headquarters, Chief Executive Alan Mulally shook hands with Gettelfinger to mark the start of the talks.
Chrysler had kicked off its negotiations with the UAW on Friday in Auburn Hills.
The health-care issue looms especially large for GM, which last year spent $4.8 billion on insurance and medical care for its workers and retirees.
GM's chief negotiator, Diana Tremblay, said GM must address its health-care expenses in the talks.
"Health care is the largest single competitive issue we face as a company," Tremblay, GM's vice-president of labor relations for North America, told reporters at a press conference. "I think it's impossible to ignore the issue."
She said about US$3 billion of GM's annual health-care bill goes to cover the cost of insuring retirees and their dependents.
GM and Ford hourly labour costs - US$73.26 and US$70.51, respectively - are about US$30 higher than those of their Japanese rivals operating US plants, according to data compiled by the automakers.
Much of that gap represents the cost of higher pensions and health-care costs for retirees, according to the automakers.
The UAW's current four-year contract with the three Detroit-based automakers expires September 14. Gettelfinger said a strike remains a possibility if the parties are unable to reach an agreement.
As the talks began, about 100 GM retirees staged a protest demonstration outside, urging the UAW to hold the line against givebacks on retiree health care.
Some retirees have challenged the union's authority to negotiate concessions on their behalf in a case still pending in a federal appeals court.
Many analysts expect the talks to include proposals to establish a union-operated trust fund for retiree health care, if the two sides can agree on how fully to offset liabilities estimated at nearly $100 billion.
In a move that remains controversial with some retirees, GM and Ford won concessions in 2005 that shifted some health-care costs to their roughly 365,000 retirees.
That agreement cut GM's annual health-care bill by about US$1 billion, but analysts say those savings will be eaten away by spiralling health-care costs unless the automaker wins further concessions.
"It's fair to say we have given a lot," Gettelfinger told reporters, speaking at Ford's headquarters.
The Detroit-based automakers have been losing market share to Japanese rivals, led by Toyota Motor Corp, in the United States, historically their largest and most profitable market.
Combined, the market share for Detroit automakers was just above 50 per cent for June and could dip below that threshold for the first time this year as the automakers cut capacity and reduce low-margin sales to car rental agencies.
In response to the downturn, GM, Ford and Chrysler have cut about 80,000 factory jobs over the past two years.
- REUTERS
