UAW chief reported open to Big 3 proposal

Report: Gettelfinger willing to agree to idea of union accepting responsibility for nearly $100 billion in retiree healthcare liability.


NEW YORK (CNNMoney.com) -- United Auto Workers union President Ron Gettelfinger has told members of his bargaining team that he is willing to agree to the creation of a union-controlled trust fund to assume responsibility for nearly $100 billion in retiree health care costs, according to a published report.

The Wall Street Journal reported that position from Gettelfinger, although it said that management and labor are still billions apart on how much should be put into the funds and whether the automakers should have to promise additional funding down the road if health care costs rise faster than expected or the funds' assets perform poorly.

Still a deal on shifting responsibility for retiree healthcare costs could clear the way for new labor agreements at General Motors (Charts, Fortune 500), Ford Motor (Charts, Fortune 500) and Chrysler Group that would allow them to be more competitive with nonunion rivals, such as Toyota Motor (Charts) and Honda Motor (Charts).

GM is also proposing a wage structure at its plants that would allow it to pay new hires less than long-time workers, according to a report in the Detroit News. GM has an older unionized workforce that will see large retirements in the coming few years, creating the need to hire as many as 15,000 to 20,000 employees, according to the paper.

Ford and Chrysler, which have younger workforces and are still in the process of closing plants and cutting staff, are not as likely to need to hire.

While the UAW has allowed the automakers to pay temporary hires less than full-time employees, it has resisted a two-tier wage structure at the Big Three automakers.

Shares of Dow component GM gained 3.4 percent in Frankfurt trading early Thursday, and Ford shares rose 2 percent there. Chrysler has not had publicly traded shares since former parent DaimlerChrysler (Charts) sold it to private equity group Cerberus Capital Management in a deal that closed last month.

The current labor contracts expire at 11:59 p.m. ET Friday, but even if there is no new agreement by then, which now appears likely, it is widely expected that the companies' plants will continue to operate while negotiations are extended.

The creation of a healthcare trust fund was part of a labor agreement at Goodyear Tire & Rubber (Charts, Fortune 500) in December that ended a strike there by the United Steelworkers union.

But that fund was much smaller than what is needed at the automakers. Goodyear is contributing about $1 billion cash to cover $1.2 billion in expected retiree health costs going forward. That represents about an 83 percent discount from its current value.

The automakers are reported to be seeking a significantly larger discount for their much larger liability, perhaps funding as little as 70 percent of the estimated liability for more than 500,000 retirees and their family members who now have their health care covered by the companies.

GM is estimated to face $51 billion in retiree health care costs for which it has not yet set aside funds, according to credit rating agency Standard & Poor's. Ford's unfunded liability is estimated at $26 billion and $17 billion at Chrysler. Top of page

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.