|General Motors and its union agree to cut costs on health benefits. CNN's Maggie Lake reports (October 18)
NEW YORK (CNN/Money) -
The United Auto Workers union, which earlier this week reached an agreement to save General Motors Corp. about $1 billion a year in health care costs, has filed a lawsuit against the automaker that challenges that agreement.
The suit, which published reports say includes two GM retirees as plaintiffs, does not represent a change of position by the union. Instead, it is seeking to have the court sign off on the agreement to reduce health care benefits negotiated for retirees in earlier agreements.
"The UAW initiated the proceedings today in order to begin the court approval process and will work to expedite those proceedings," said the statement from the union.
The union does not technically represent retirees in the collective bargaining process, and some court decisions have suggested that the union therefore can not agree to reduce benefits to retirees without court approval.
The UAW is "worried about being sued by retirees for changing benefits," Bernstein & Co. auto analyst Brian Johnson told the Detroit Free Press. "They're seeking to make sure they don't."
The union says the language of the tentative agreement is being finalized, and the union leadership is in the process of briefing local union leaders and retiree groups on the proposed changes. Details will not be released until that process is complete, it said. The agreement covers about 750,000 union-represented active employees, retirees and their family members.
The union said in a brief statement late Monday that the agreement needs ratification by UAW membership before it takes effect.
"The tentative agreement on health care matters is the result of an in-depth analysis of GM's financial situation and many weeks of intense discussion between the UAW and GM," said the union's Monday statement. "We believe it is clearly in the best interests of UAW GM active workers, retirees and their families."
Shares of GM rose on news of the cost saving agreement, even as the company was reporting a far worse than expected third quarter loss. But shares slipped 3 percent in Tuesday trading.
Objections from retirees don't just pose a legal threat to the agreement. They also pose a political threat to UAW President Ron Gettelfinger, who faces re-election in 2006. Both retirees and active members vote for the union delegates who vote for union leadership.
The GM agreement also puts pressure on the union to negotiate similar reduction in benefits for retired and active union members at Ford Motor Co. (Research) and DaimlerChrysler's (Research) Chrysler Group.
DaimlerChrysler CEO-designate Dieter Zetsche told reporters at the Tokyo Motor Show Tuesday that Chrysler would seek immediate talks with the union on its own cost-saving agreement. Ford chief operating officer Jim Padilla made similar comments at the show Wednesday.
For more details on the deal between the UAW and GM, click here.
For more details on GM's loss, click here.