UAW-GM template may not hold, report says

Deal that ended GM strike might not fly with Ford, Chrysler; provision calling for lower wages, benefits for some newly hired workers causes concern, paper says.


NEW YORK (CNNMoney.com) -- There is reluctance on the part of both union and management negotiators at Ford Motor and Chrysler to have those company's labor deals with the United Auto Workers union follow the pattern set by General Motors, according to a published report.

Typically the UAW tries to have the first labor pact reached with one of the three U.S. automakers set the pattern for deals at the other two. Last week the union reached a tentative agreement with GM (Charts, Fortune 500) that ended a two-day strike.

UAW officials announce a deal with GM that ended a two-day strike. There might be problems with the union reaching similar deals with Ford and Chrysler, according to a report.
UAW officials announce a deal with GM that ended a two-day strike. There might be problems with the union reaching similar deals with Ford and Chrysler, according to a report.

But The Wall Street Journal reported Tuesday that the union negotiating representing workers at Chrysler who met Sunday expressed reluctance to seek a deal that mirrors the GM deal. The provision in that agreement that allows for lower wages and benefits for some of the newly hired workers raised their concern, according to the paper.

There was also concern among union negotiators about having union-controlled trust funds assume billions in future spending on health care for retirees and their family members. The GM deal will shift an estimated $51 billion in those costs to the funds, after it contributes about $35 billion in assets to the funds. Ford (Charts, Fortune 500) and Chrysler face about $45 billion combined in those health care costs.

And the paper reported that management negotiators at Chrysler and Ford may not be able to match the promises that GM made in the contract about the timing and production plans of new products at its U.S. plants. Ford and Chrysler are not as far along in their efforts to turn around their operations to stem losses, so they would be reluctant to lay out their plans as part of the contracts. But those promises were seen as important job guarantees by GM for the 73,000 UAW still working at GM, and thus central to reaching a deal with the union.

And Ford and Chrysler also may not be able to match about $700 a year in improved pension benefits that GM granted its retirees by using the overfunding in its pension plans. The Ford pension plan for its UAW members is underfunded by about $560 million, according to the paper.

The paper reports Chrysler, which has yet to win reductions in retiree health care spending that the union granted to the GM and Ford in recent years, is concerned about the provision in the GM deal that will delay the trust funds from assuming the retiree health care costs until 2010.

Negotiations between the union and Ford and Chrysler are expected to resume this week. The union granted an extension to their contracts with the companies just before the Sept. 14 contract expiration as it concentrated on reaching an agreement with GM. It has yet to say which company it will seek to reach a deal with next.

The contract extensions are open ended and can be terminated by either side with three days' notice.

In a separate report in the Detroit News, it appears that a budget deal approved by Michigan state legislators early Monday to close a budget gap there could cost U.S. automakers and their dealers an estimated $350 million.

The deal removes refunds of sales taxes paid on demonstration vehicles and defaulted leases since 1999, according to the newspaper. GM alone will take a $100 million hit under the budget deal.

The state budget also raises taxes on services, among them consultants and administrative services, that will cost the automakers tens of millions of dollars, according to the paper. 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.