The United Auto Workers union told its leaders in General Motors Corp. plants nationwide that an agreement on the company's request to lower its $5.6 billion annual expense for health care is "possible."
Factory-level officials were notified by e-mail today, Ron Gettelfinger, the union's president, said in a telephone interview today. Those officials in turn will tell rank-and-file workers at Detroit-based GM, the world's biggest automaker.
"We have reached a point in these talks where it is possible we could reach an agreement on this matter," said the e- mail. "In view of this fact, we thought it appropriate to provide you this update."
The two sides will keep meeting over the weekend and have established no timetable for concluding the talks, Gettelfinger said. Last-minute disputes could still derail the accord, said UAW Vice President Dick Shoemaker, who joined Gettelfinger in the interview.
GM and the UAW have been negotiating for months on ways to lower GM's health-care bill, which Chief Executive Rick Wagoner identified as a source of "crisis" in January. The automaker's U.S. sales and market share have fallen this year, and Wagoner is trying to return the company to profitability after three quarters of losses.
"Obviously we want to bring this to a conclusion and move forward with other issues," Gettelfinger said in the interview.
Stefan Weinmann, a GM spokesman, declined to comment on the status of the talks.
The automaker's stock rose 83 cents, or 3.1 percent, to $27.98 at 4:01 p.m. in New York Stock Exchange composite trading. The shares are down 25 percent since late July.
Agreement in Principle
GM has been trying to get the union to accept benefits that are closer to what salaried employees at the company get. Salaried workers pay some of their health-care premiums as well as co-pays. Union workers don't pay the premium and have fewer and lower co-pays than salaried employees.
David Cole, chairman of the Center for Automotive Research in Ann Arbor, Michigan, said he was notified by GM yesterday that an agreement in principle on health care had been reached by the two sides. Cole said last-minute disputes could still unravel the accord.
He said he expects the agreement to be included in GM's earnings release on Oct. 17.
"It will be quite significant," Cole said in an interview today. "It will not just be a 1 percent increase in co-pays. It will be a lot more substantial than that."
Investor Reaction
Brian Johnson, an equity analyst at Sanford C. Bernstein & Co. in New York, said if GM can reduce its health-care and other labor costs by $1 billion, investors would react positively.
"$1 billion would be worth $2 a share to GM's net income," said Johnson, who has a "buy" recommendation on GM's shares based on an anticipated restructuring of the automaker.
GM is expected to report that it lost 87 cents a share in the third quarter, the average estimate of 17 analysts surveyed by Thomson Financial. That compares with a profit of $315 million, or 56 cents a share, in the same quarter a year ago. Those same analysts project the automaker will lose $2.43 for 2005 compared with a profit of $2.8 billion, or $4.95 a share, in 2004.
"Any kind of deal would be a significant milestone, as it would mark growing recognition by all constituents in the industry that the healthcare situation cannot persist indefinitely," Jonathan Steinmetz, an analyst at Morgan Stanley in New York, said in a note to investors.
More Cuts Needed?
GM must be careful to avoid foreclosing the possibility of additional health-care cuts during 2007 contract talks with the UAW, since inflation by then might have erased the value of any concessions negotiated in the next few days, he said.
Wagoner is trying to cut costs because revenue has been declining along with the company's sales in the U.S.
GM's U.S. market share has fallen to 26.6 percent through September from 28.1 percent in 2000 as buyers buy more cars and trucks from rivals such as Toyota Motor Corp. and Nissan Motor Co. The decline prompted Standard & Poor's to lower GM's corporate credit rating to BB- from BB, putting the automaker three levels below investment grade.
Possible Strikes?
In a separate interview yesterday in Detroit, Gettelfinger declined to provide details on the talks, other than to say any changes wouldn't be as large as Detroit-based GM initially wanted.
The automaker is hoping to cut $20 billion from the $61 billion it estimates it will have to pay in coming decades to cover health care and life insurance for UAW workers, retirees and dependents. Gettelfinger described cuts that deep as a non- starter.
In an interview earlier this week, Al Coven, president of UAW Local 699 at Delphi Corp. steering gear plant in Saginaw, Michigan, said UAW Vice President Dick Shoemaker warned union leaders in August of the possibility of unilateral cuts if the two sides failed to reach agreement.
Delphi filed for bankruptcy protection last week after failing to win concessions from its unions or financial aid from GM, its former parent.
"Shoemaker told us that if GM or Delphi do anything unilateral to change our contracts, they're going to have a hard time building cars in this country," Coven said.
Delphi
Delphi Chief Executive Steve Miller said in an Oct. 10 interview that health-care talks between the UAW and GM are focusing on whether blue-collar workers will make out-of-pocket health-care payments closer to those of salaried workers.
Salaried workers at GM pay 32 percent of the cost of their health-insurance costs. UAW members pay 7 percent, said Toni Simonetti, a GM spokeswoman.
Any changes to GM's health-care plans would also apply to Miller's 24,000 UAW workers, under terms of the union's agreements with the two companies after the automaker spun Delphi off in 1999.
Kirk Kerkorian, the billionaire who launched a failed takeover of Chrysler Corp. a decade ago, raised his stake in GM to 9.9 percent on Oct. 12. Kerkorian disclosed on Sept. 21 that he may use his stake, now at 56 million shares, to seek a seat on GM's board.
source: http://quote.bloomberg.com/apps/news?pid=10000103&sid=acTpBdUC5a9M&refer=news_index 20oct2005
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