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In the midst of one of the weakest automobile sales seasons in recent memory, members of the United Automobile Workers union walked off the job at General Motors plants nationwide two days ago, kicking a marathon negotiation session into gear. Negotiators for both sides stayed at the bargaining table until a new deal was announced at 3AM today by UAW president Ron Gettelfinger. The result: GM workers get some important job security protections and GM gets to offload its health plan into a new trust (all details have not yet been announced). This was the first time GM had been struck in more than 37 years. When the UAW walked in 1970, they remained off the job for two full months. The last local UAW strike affected two plants in Flint, Michigan in 1998 in a walkout that lasted nearly seven weeks.

VEBA Takes on $50 Billion
Key for GM was the creation of the Volunteer Employee Benefits Association, or VEBA. This new trust, a part of the new deal with the UAW, takes over approximately $50 billion in obligations for health benefits owed to retired GM/UAW workers. It was the critical issue for GM. The UAW, on the other hand, had offered to help set up the trust with GM assets, but insisted that employee job security be given consideration first. “I think our retirees will be exceptionally pleased with this contract,” Gettelfinger said. “For active members, there will be some changes. I think overall they will be very, very pleased with the outcome of these negotiations and the job security associated with it.”
A National Strike Puts GM on the Hotseat
When GM balked at discussing job security, the UAW didn’t hesitate to begin planning a strike. While the union originally discussed walking out on various local plants, the decision was made to go national, hoping it would shorten the length of the strike. Other unions, including the Teamsters union, added their support, saying their 10,000 workers would respect the picket lines at all GM factories.
The union felt it had made too many concessions and that its members deserved longevity and security, including full health coverage. They feel they should not be responsible for, “bad executive decisions at GM.”
Some analysts were surprised by the short strike, but most expected GM to cave, as the ripple effect from a prolonged walkout would create a flow of red ink that extended across the country. With most workers returning to work by the second shift of the day on Wednesday, GM will not lose too much and in the long run, may benefit, as their current lineup of vehicles is considered some of the best product the company has produced in decades.
Don’t forget Ford and Chrysler
Shortly, discussions are scheduled to take place between the union and Ford Motor Company and Chrysler. Health care will be a top discussion point in those meetings as well. The UAW did not comment on which company they would turn their attention to next, but between the two, an additional $50 billion in health benefit liabilities exist, and a similar strategy for transfer of liability in exchange for job security may be in play. All three companies need to shed the liability of health care as it currently exists if they are to close the gap on profit margins with Toyota Motor and Honda. More than 100,000 UAW workers are still on the job at Ford and Chrysler, working under temporary contract extensions.
GM lost aproximately $13 billion on its core North American auto operations in 2005 and 2006 combined, as it paid more than 30,000 UAW members up to $140,000 each to leave the company.