General Motors Corp. and the United Auto Workers continued to discuss the automaker's proposal to pay the union to take on retiree health expenses, even though GM's latest offer on the issue was rejected by the UAW president, a person who has been briefed on the talks said.
The person, and a union local leader who also was briefed on the talks, said negotiators have wrapped up work on all noneconomic issues and are trying to figure out the health care piece because the rest of the contract, including job security promises, pay and health insurance contributions, is contingent upon it.
Both people requested anonymity because the talks are private. Each said the UAW is still crunching numbers on GM's proposal to offload most of its $51 billion in unfunded retiree health care costs on the union.
GM spokesman Tom Wickham and UAW spokesman Roger Kerson declined to comment on the talks Thursday.
Thursday was the sixth day of bargaining since GM's contract with the UAW was scheduled to expire, but the union has extended the pact hour by hour. Negotiators went home for the night early Friday and were scheduled to meet again later in the morning, Wickham said.
With both sides far apart on economic issues, the talks likely will take several more days to complete, one of the people briefed on the talks said.
Discussions continued even though UAW President Ron Gettelfinger on Tuesday rejected a GM offer to pay into a retiree health care trust called a Voluntary Employees Beneficiary Association, or VEBA, one of the people said.
GM, which has been picked by the union as the lead company and potential strike target in this year's bargaining, badly wants the UAW to agree to the trust. Whatever agreement is reached with GM likely would be used as a pattern for the other two Detroit automakers, Ford Motor Co. and Chrysler LLC.
While the VEBA is studied, negotiations have slowed on other economic issues, both people said. Noneconomic issues include grievance procedures, absenteeism and other items.
The UAW is seeking to trade taking on the trust for pledges from GM that it will build new vehicles in U.S. factories, the people said.
Deutsche Bank analyst Rod Lache said in a note to investors Thursday that the union has agreed to the concept of a VEBA but so far doesn't like the company's terms.
“The UAW knows that GM cannot sign a contract that excludes a VEBA deal at this point, and that they cannot accept the consequences of an uncompetitive cost structure either,” Lache wrote. “Without a VEBA deal, GM has threatened to begin a much more aggressive downsizing of its U.S. manufacturing base.”
Lache wrote that GM knows it is risking a strike.
“It is our belief that the most likely outcome is that GM and the UAW will reach a compromise and pursue a VEBA solution after a few days of drama,” he wrote.
Since the company and union are billions of dollars apart on how much GM would pay into the trust, Gettelfinger wanted to talk about other issues, one of the people said.
Now under discussion is a second offer from GM that doesn't include the trust but has larger cost cuts, including up to a $5 drop in hourly wages, increased health care contributions, fewer guarantees of new work at U.S. factories, reduced vacation time and other items.
GM, as well as Ford and Chrysler, are trying to cut what they say is about a $25 per hour labor cost gap with their Japanese competitors. Industry analysts say the costs must be reduced for the U.S. companies to survive.
Analysts have said GM wants to pay the union about 65 percent of its retiree health care obligation to form the trust. The union has hired an outside consultant to study GM's proposal, the people briefed on the talks said.
