Tuesday, January 09, 2007

GM: Health care key to UAW talks

Tuesday, January 09, 2007
Charles V. Tines / The Detroit News
GM: Health care key to UAW talks
In upcoming negotiations, automaker seeks to close labor cost gap with Japan.
Bill Vlasic / The Detroit News

DETROIT -- General Motors Corp. is targeting retiree health care costs as a key issue in this summer's watershed contract negotiations with the United Auto Workers.

The No. 1 U.S. automaker is approaching the UAW talks with a "very high sense of urgency" as it tries to close the gap on labor costs with Japanese competitors, GM's new chief of North American operations said Monday.

"We're going to have to continue to go after costs like health care," said Troy Clarke, who took over as president of GM North America in July. "If there's a cost that keeps me up at night, it's health care."

Clarke said GM's estimated $5 billion annual health care bill is growing by almost 15 percent annually, putting added pressure on the company's ability to compete in the U.S. market.

GM provides health care for more than 750,000 retirees and their dependents. In October 2005, the UAW agreed to pass some costs on to retirees, but Clarke said GM needs more relief.

"We have the retiree health care issue and it's very stressful," Clarke said in an interview at the 2007 North American International Auto Show. "We've got to come at that some way."

While the auto show is a celebration of new cars and trucks, the challenges of the upcoming UAW talks loom over GM, Ford Motor Co. and the Chrysler Group of DaimlerChrysler AG.

Buyouts and early retirements last year slashed tens of thousands of factory jobs at GM and Ford, but the union negotiations are expected to focus on so-called "legacy" costs such as health care.

"The gap between the Big Three automakers and the (foreign) transplants used to be the productivity difference," said Ron Harbour of the Harbour Group consulting firm. "That gap hardly exists anymore, so now it's about wages and benefits."

GM Chairman Rick Wagoner said Monday that the automaker has made "significant progress" in cutting costs through buyouts and the 2005 health care deal. However, he said a "cost gap" still separates GM and the nonunion U.S. factories operated by foreign rivals.

"We're facing some structural issues that have been 50 years in the making," Wagoner said.

One issue that Wagoner said may not necessarily be a high priority in the talks is the elimination of the so-called "jobs bank" that pays full wages to laid-off UAW workers.

By cutting 34,000 jobs through buyouts, GM has also substantially trimmed the rolls of the jobs bank. "There's more than one way to skin a cat," Wagoner said.

UAW President Ron Gettelfinger, through a spokesman, declined Monday to comment on upcoming contract talks and competitiveness issues raised at the auto show.

Clarke, who has previously directed union negotiations at GM, said he expected this summer's talks to be a "problem-solving process" with the UAW.

"They've got issues, we've got issues," Clarke said. "It makes sense to say, let's agree on what we're trying to get done here."

The challenge, Clarke said, is to preserve benefits won by the UAW in past contracts while still improving GM's competitive position.

"There are obligations that we have made and we will live up to those agreements," he said. "We also intend to have an economically viable business."

GM is not alone in laying plans for the 2007 contract negotiations. Ford Chief Executive Alan Mulally, who was hired last fall, has been meeting regularly with Gettelfinger.

Clarke dismissed as false reports that GM is stockpiling vehicle inventory in the event of a strike by the union.

You can reach Bill Vlasic at (313) 222-2152 or bvlasic@detnews.com.

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