General Motors Corp. reached a tentative deal with striking workers Wednesday on a historic new contract which will help the automaker narrow the cost gap with its Asian competitors.
The deal also set a framework for contracts with Ford Motor Corp. and Chrysler LLC, which face similar issues on containing labor costs.
Production resumed Wednesday following a two-day strike by more than 73,000 United Auto Workers members who walked out of 80 plants after contract talks broke down over issues of job security and health care.
Few details of the contract were publicly released but union and company officials said it includes an agreement to transfer the administration of retiree health care to the union in exchange for job security guarantees.
While this will require a massive cash infusion, it will take a more than 50 billion-dollar liability off GM's books and allow it to dramatically reduce its labor costs, analysts said.
The deal is also said to give GM the right to pay significantly lower wages to some new hires and to offer early retirement bonuses to older workers so as to clear the way for new hires.
It also reportedly froze wages and includes a cash bonus in lieu of cost-of-living wage increases, sources said.
“We really see this as revolutionary,” Michael Robinet, an analyst with CSM Worldwide, told AFP.
“They were able to really change the way they do business with each other.”
Union officials praised the contract and said the health care trust will protect retirees and be sufficiently funded to pay benefits for next 80 years.
“We feel very good about this agreement,” UAW president Ron Gettelfinger said at a press conference shortly after the deal was reached at 3:05 am (8:05 GMT). “I think this strike helped our side.”
Gettelfinger predicted GM's employment level should remain constant over the four-year term of the contract.
Further details are being withheld pending union ratification, the union said. The contract must also be approved by courts and federal regulators.
The largest US automaker said the deal “paves the way for GM to significantly improve its manufacturing competitiveness, providing the basis for maintaining and strengthening its core manufacturing base in the United States.”
“This agreement helps us close the fundamental competitive gaps that exist in our business,” GM chairman and chief executive Rick Wagoner said in a statement.
“The projected competitive improvements in this agreement will allow us to maintain a strong manufacturing presence in the United States along with significant future investments.”
GM would not disclose how much production was lost by the brief strike, which also forced the closure of three Canadian plants.
All but one of the Canadian plants were scheduled to resume production Wednesday afternoon while the Windsor, Ontario transmission plant was scheduled to resume production Thursday, a GM spokeswoman told AFP.
GM has been seeking concessions from labor as it undergoes a massive restructuring in the face of a steady loss of market share to Asian competitors. GM commands just 24 percent of the critical US market, down from more than 40 percent in the mid-1980s.
The health care agreement is expected to relieve GM of 14 billion dollars in retiree health care obligations if it is settled for 70 cents on the dollar as is widely expected, Deutsche Bank analyst Rod Lache wrote in a research report Monday.
While GM would take a huge hit to fund the program, the deal would then improve free cash flow by 2.7 to 2.8 billion dollars a year and cut labor costs by 18 to 19 dollars an hour, he estimated.
Shares of GM closed up 9.36 percent at 37.64 dollars.
GM's current labor costs of 73.26 dollars per hour is nearly 30 dollars per hour more than what Asian rivals such as Toyota and Honda pay workers in their non-unionized US plants.
The actual hourly wage of GM workers is roughly 28 dollars per hour, a GM spokeswoman said.
This was the first strike at GM since 1998 — when one lasting 53 days cost the automaker some two billion dollars — and the first nationwide strike at GM since 1970.
