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Report: GM sets deadline for UAW
Auto firm gives union until June 30 to agree to health care savings, or it will slash costs itself.
June 14, 2005: 8:25 AM EDT

NEW YORK (CNN/Money) - General Motors Corp. is set to take unilateral action to reduce its health care expenses if it doesn't get concessions from the United Auto Workers union by the end of the month, according to a published report.

The Detroit News reported Tuesday that union officials are warning their members that they could face paying significantly more for health care coverage sooner rather than later.

"The writing's on the wall," Dave Peterson, president of Local 31 in Fairfax, Kan., told the newspaper. "Sooner or later we're going to be faced with not enjoying the level of benefits we've currently got. It's going to be sooner than we'd like."

GM (Research) Chairman and CEO Rick Wagoner told shareholders last week the company was in talks with the union on reducing its health care costs for both active union members and retirees, and that while it preferred to reach a cooperative deal with the union, it couldn't wait to get relief from health care expenses.

Wagoner also announced plans at that time to close an undisclosed number of plants and cut 25,000 union-represented positions at the auto manufacturer by the end of 2008.

UAW spokesman Paul Krell declined to comment to the News on what he called GM's "internal deadline." GM spokespeople also declined to comment on whether a deadline had been given to the union.

Union officials have repeatedly said they oppose making any changes that would require a reopening of the GM labor deal that runs through September 2007. But the News reports that under the existing national labor agreement, GM has some latitude to raise out-of-pocket health care expenses for current and retired workers, according to labor experts and analysts.

The newspaper reported that over the weekend, members of UAW Local 652 in Lansing, Mich., were told to expect increases to co-payments, deductibles, premiums or other out-of-pocket medical expenses, although no specifics have been revealed.

Some union officials told the newspaper that the union would fight any unilateral move by GM to cut health care expenses.

"That would be a big mistake," Oscar Bunch, president of UAW Local 14 in Toledo, Ohio, told the paper. "Remember Flint. It would be a drastic mistake."

Bunch was referring to a 53-day strike at a GM Flint metal fabricating plant and a Delphi parts plant there in 1998 that shut down the auto manufacturer's North American operations.

General Motors said that its union employees pay 7 percent of their annual health care costs, on average, while salaried workers such as managers are responsible for 27 percent.

Deutsche Bank auto analyst Rod Lache told the News that if hourly employees paid the same share of their health care costs as salaried GM staff, it would the company $2,500 per person and $300 million a year overall. But he said that may not be enough to help GM stem its rising health care costs.

"Unfortunately this equates to less than one year's health care inflation," he told the newspaper.

To see if GM could be facing bankruptcy, click here.

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