DETROIT – The United Auto Workers union and General Motors Corp agreed to a new contract on Wednesday, ending a two-day nationwide strike by 73,000 workers with a groundbreaking deal that includes a health-care trust fund.
News of the tentative four-year pact sent the automaker's shares up more than 6 percent in early trading.
The agreement allows GM to shift more than $50 billion of retiree health-care liabilities to an independent union-aligned trust — considered a key requirement in closing the labor-cost gap between U.S. automakers and their foreign competitors.
UAW President Ron Gettelfinger, speaking at a news conference at the union's Detroit headquarters, said production at GM facilities would resume on Wednesday, two days after the first national UAW strike at GM since 1970.
The union expects to meet on Thursday or Friday with local unit presidents to go over the details to allow for local ratification meetings over the weekend, Gettelfinger said.
"We feel very confident it will be ratified," he said.Ratification requires a majority vote of UAW members.
GM shares rose 4.8 percent to $36.08 at midday on the New York Stock Exchange, while Ford Motor Co shares rose 4.5 percent to $8.72. The price of GM bonds rose after news of the deal and the cost of protecting debt with credit default swaps fell sharply.
Investor and analyst attention would now be focused on Ford and Chrysler LLC, which were next on the UAW's list for active bargaining with the auto industry's remaining 107,000-plus workers.
Ford said on Wednesday that it was pleased that the UAW was able to reach a tentative labor deal with GM. Gettelfinger said a decision on the next bargaining target for a new contract — either Ford or Chrysler — could be made on Thursday.
"We are not going to spend a lot of time waiting here, we feel very comfortable with this agreement and we are going to move on," Gettelfinger said.
GM said the contract "paves the way for GM to significantly improve its manufacturing competitiveness" and maintain a strong production presence in the United States.
"There's no question this was one of the most complex and difficult bargaining sessions in the history of the GM-UAW relationship," GM Chief Executive Rick Wagoner said in a statement.
Gettelfinger led the UAW out on strike Monday, saying the top U.S. automaker had not met the union's demands for guarantees of job security.
"I think our retirees will be exceptionally pleased with this contract and for our active membership, there will be some changes, but overall they will be very, very pleased with the outcome of this negotiation and the job security that is associated with this," Gettelfinger said.
One person briefed on the deal said it was expected to include lower-tier wages and benefits for new hires and noncore production workers, according to a story in the Detroit Free Press.
"My gut feel is they got to the right solution," said Peter Jankovskis, chief investment officer of Oakbrook Investments in Lisle, Illinois.
JOBS AND HEALTH CARE
GM has lost about $12.3 billion in the past two years and has seen its U.S. market share drop to about 24 percent 2006 from about 46 percent in 1978. It has long claimed it needed cuts in health-care costs and other areas to compete.
Gettelfinger said he expected GM's UAW employment in the United States to be near unchanged four years from now, depending on GM's production volumes.
"I think that number will be pretty much the same, if not higher," Gettelfinger said.
Neither GM, nor UAW officials elaborated on details of the health-care trust. However, Gettelfinger told reporters the union expected the trust to provide steady funding for 80 years, based on cash flow and solvency projections.
The new UAW-aligned trust, known as a Voluntary Employee Beneficiary Association, or VEBA, must receive court approval, and GM said the U.S. Securities and Exchange Commission would conduct a review of its accounting treatment as well.
John Wolkonowicz, a senior automotive analyst for consulting firm Global Insight said the VEBA is a win-win.
"GM gets those costs off its book, (while the) union has those funds protected in case GM ever goes bankrupt and gets to control it," he said, adding that a trust fund may eliminate half the cost disadvantage GM has with Japanese automakers.
A GM spokeswoman said the company would not provide contract details before it was presented to UAW members.
Wall Street analysts have said establishing a VEBA could cut GM's annual costs by $3 billion in exchange for a one-off payment expected to top $30 billion.
Talks between GM and the UAW dragged on for 10 weeks and passed the September 14 expiration of the old contract.
This deal was reached at 3:05 a.m. EDT, announced less than an hour later by the UAW and was filtered quickly to local units.
"We pulled the pickets just after 4 (a.m.) and we are getting ready to go," said Chris "Tiny" Sherwood, president of UAW Local 652 in Lansing, Michigan.
David Green, president of Local 1714 in Lordstown, Ohio, said workers seem to be relieved to get back on the job.
"There is still some concern, we don't have all of the details yet," Green said.
Ghana Goodwin-Dye, vice president of UAW Local 909 in Warren, Michigan, said members would be briefed over the weekend and a vote could be held next week.
"They don't want the ball to slow down, they want to keep it moving," she said.
Three GM Canada plants that were forced to shut their doors due to the strike should be up and running by the end of Wednesday, a spokesman for GM Canada said.
GM Canada's two car plants in Oshawa, Ontario, which were shut down on Tuesday, will reopen Wednesday afternoon, said Stew Low, public relations director at GM Canada.
GM's Windsor, Ontario, transmission plant, which closed on Monday almost immediately after the U.S. strike began, should reopen by midnight.
Get all the stories you need-to-know from the most powerful name in news delivered first thing every morning to your inbox