The United Auto Workers union has agreed to a two-tiered wage system and a switch to far-less generous pensions for new hires in exchange for job security promises in its landmark contract with General Motors Corp., the union said Friday.
The tentative agreement offers far more concessions than initially announced when a deal was reached early Wednesday.
It will serve as the framework for negotiations with Ford Motor Co. and Chrysler LLC and is expected to help the Big Three US automakers significantly narrow their labor cost gap with the non-unionized US plants run by foreign rivals.
UAW President Ron Gettelfinger said he expected to have the new agreement ratified by October 10.
“Our goal is transparency,” Gettelfinger said. “Our members will have the opportunity to be exposed to all of the information about this proposed contract, so they can make an informed decision.”
GM will spend between 35.3 and 36.9 billion dollars to transfer the administration of retiree health-care benefits to the union.
This will take a ballooning future liability currently estimated at more than 50 billion dollars off GM's books and allow it to dramatically reduce its labor costs.
The union won a “moratorium” on plant closures and sales and GM made specific investment commitments at 16 different factories.
Without the investments, the factories could have become obsolete, jeopardizing the jobs of the workers, UAW officials said. The new commitment represents billions of dollars in new investment, union officials said.
In return for the investment, however, the union is expected to make major concessions on work rules and accept dramatically lower wages for non-production jobs, union sources said.
New workers also will be covered by a new defined contribution pension plan, rather than the previous gold-plated defined benefit plan, and less generous health care and dental plans.
GM also plans to offer buyouts and early retirement to an additional 24,000 workers and replace them with lower-cost new hires.
The two-tier wage represents the first time in 70 years the union agreed to a lower pay scale for some workers. The previous pay distinctions had been based on whether a worker was a journeymen in a skilled trade.
Harley Shaiken, a labor expert at the University of California-Berkeley, said the two-tier agreement was obviously very painful but it was also reversible.
“There is nothing that says if GM is doing better in 2011, the union can't go back and bargain for higher wages for workers on the second tier,” he said.
The second major concession by the union involved the company's cost-of-living allowance.
The union agreed to divert cost of living raises due in the next four years to pay for employee health care. As part of the agreement, employees will not pay higher deductibles or co-payments.
Union members will not be getting any pay increases during the four-year agreement but they will get a 3,000-dollar signing bonus and one-time lump sum payments in 2008, 2009 and 2010, equaling three percent of base wage or about 2,100 dollars.
Current retirees also are scheduled to get a pension increase that will average about 700 dollars a year to help them cope with higher health care costs.
GM and the UAW concluded the new tentative agreement on Wednesday after a 40-hour strike that halted all of GM's operations in the United States in the first nationwide strike in 37 years.
