Tuesday, March 13, 2007

Success may trip up GM in talks

Tuesday, March 13, 2007
Success may trip up GM in talks
As turnaround gains traction, automaker may find it harder to demand givebacks from UAW.
Sharon Terlep / The Detroit News

General Motors Corp.'s improving outlook could be a handicap during labor negotiations this summer, when the automaker will be in the delicate position of trying to sell its comeback on Wall Street while also attempting to wrest concessions from the United Auto Workers.

For now, GM seems to have pulled out of the tailspin it was in a year ago, when multibillion-dollar losses and skidding market share dominated headlines.

Sales are up -- 3.7 percent in February. Operating costs are down. And the company is on track to report a profitable quarter for the first time in two years Wednesday when it releases fourth-quarter and full 2006 financial results.

Such positive signs may make it tougher to sell an already wary UAW on the idea that major givebacks are still needed to safeguard the company's future.

Top UAW officials have publicly acknowledged that GM needs the union's help, but some local UAW leaders and rank-and-file members say the automaker isn't as bad off as it seemed even a year ago.

"They understand that if they show profit, it's going to be something we look at," Chris Sherwood, president of Local 652 in Lansing, said of GM. Local 652 represents workers at a Cadillac plant.

"Hopefully, they won't get carried away. They've got to take into account that a lot of our folks are saying, 'Enough is enough.'"

Contract talks should wrap up in September when the UAW's four-year agreement expires.

GM is working to craft a finely tuned message grounded in the idea that any recent gains could be lost if GM still can't compete against lower-cost foreign rivals.

"The union understands that better than anybody," GM North America President Troy Clarke said in a recent interview.

"If they show very good earnings, it's going to be a tougher job for GM," said Harley Shaiken, a labor expert at the University of California, Berkeley. "Both management and labor are going to be walking a very fine line."

GM is not expected this week to report a profit in North America and has made it clear that getting the unit in the black and keeping it there depends on reducing health costs for active and retired workers.

"We cannot, as an American auto industry in the long-term, survive with the legacy cost burden that we've gotten," Bob Lutz, GM vice chairman of global product development, said last week at the Geneva auto show. "We need to work with our UAW partners to find some sort of solution."

Downsizing by Detroit automakers has cut tens of thousands of workers from the union's ranks, but the UAW remains an influential force within GM, Ford Motor Co. and DaimlerChrysler AG's Chrysler Group, Shaiken said. Even in tough times, he said, "union leaders do not want to give up things won with great sacrifice."

The UAW already has taken the unusual step of agreeing to health care cuts in a landmark 2005 deal with GM that was ratified by 61 percent of workers -- a margin slim enough to make GM nervous.

At the same time, analysts say the UAW is realistic about the challenges facing GM, Ford and Chrysler. While GM is faring better than its crosstown rivals, the picture is far from rosy. As GM execs are quick to point out, even a few billion dollars in profit is hardly stellar given GM's size.

Then there's the issue of health care. By 2008, GM is expected to spend more than $1,900 on health care for every vehicle it builds in the United States, according to the credit rating firm Fitch Inc.

"They're both struggling so badly that neither side can afford to let things go downhill," labor expert Jim Hendricks of the Chicago-based law firm Fisher & Phillips said of GM and the UAW. "That hasn't changed just because they've had some good news."

Whatever deal UAW negotiators strike with GM will have to be approved by workers, who have never voted down a national contract, although the margins are narrowing.

"We're not going to let GM dupe us at the bargaining table -- we've got people at international just as smart at their guys," said George McGregor, president of UAW Local 22, which represents workers at GM's Hamtramck factory. "But we know we've got to make some sacrifices. We're going to do what we need to do to keep our members working as long as we can."

You can reach Sharon Terlep at (313) 223-4686 or sterlep@detnews.com.

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