GM May Trim Imports ‘Substantially’ in UAW Talks

GM May Trim Imports ‘Substantially’ in UAW Talks (Update1)
 


By Jeff Green and Greg Miles

May 14 (Bloomberg) — General Motors Corp., facing a probable bankruptcy by June 1, is willing to “substantially” cut planned U.S. imports from China and elsewhere to get a money-saving agreement with the United Auto Workers.

Using U.S. production instead of imports would pivot on whether the UAW can build the vehicles at a cost GM can afford, Chief Executive Officer Fritz Henderson said today in a Bloomberg Television interview. He said Detroit-based GM had forecast a 12-fold increase in imports to 235,000 by 2014.

“This is a discussion we’re having with the UAW,” Henderson said. “We’re most profitable when we build where we sell.”

GM’s decision to shut 16 U.S. plants and boost imports to 7 percent of North American sales has emerged as a sticking point in talks on a new UAW contract. GM needs the accord as part of a plan to chop debt with the UAW, bondholders and the government by $44 billion or be forced into bankruptcy in 18 days.

Henderson said “it is probable” that GM will end up in court protection, going beyond a May 11 comment that a Chapter 11 filing was “more probable” than the automaker had previously thought.

UAW President Ron Gettelfinger and Vice President Cal Rapson met with members of an Obama administration auto task force May 5 in Michigan to protest the import plans, UAW Vice President Bob King said last week. The union also wrote to senators urging them to prod GM to reduce U.S. plant closings.

“I think you will see in the end a substantially lower amount of volume would be brought in and a substantially higher amount will be built here,” Henderson said. “You’ve got to be fully competitive.”

‘Slap in Face’

U.S. Senator Sherrod Brown, an Ohio Democrat, urged GM to cancel plans to import cars from China.

“What’s good for GM is no longer good for America,” Brown said in a statement. “This idea is a slap in the face to American auto workers and American taxpayers. If officials at General Motors think that U.S. taxpayers will finance cars made in China while American plants are closing, they’re either tone- deaf or shortsighted.”

GM renewed talks with the UAW last week and is proposing a labor-saving agreement similar to that approved earlier by Chrysler LLC workers, Rapson told union leaders this week at meetings in Cleveland, according to people who attended the sessions or were briefed by participants.

GM has proposed that the UAW swap $20 billion in the automaker’s obligations to a union health-care fund for $10 billion in cash paid out over an unspecified period, as well as equity equal to 39 percent of a restructured company.

Pushing for Deadline

The automaker and the union agreed to changes in work rules, bonuses and jobless benefits after UAW officials walked out of talks on the medical trust on Feb. 13. Rapson told UAW leaders this week that the union needs to ratify a new agreement by the June 1 deadline.

A second round of union buyouts also is planned this year, Rapson told UAW leaders, according to the people familiar with those briefings. About 7,000 workers accepted the initial offers to retire or leave early as GM works toward a goal of shrinking to 40,000 union jobs by the end of 2010 from 62,000 last year.

A UAW spokesman, Roger Kerson, declined to comment.

GM fell 6 cents, or 5 percent, to $1.15 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have lost 94 percent of their value in the past year as GM’s losses accelerated and the company was forced to rely on federal aid to avert a collapse. GM is being propped up with $15.4 billion in emergency U.S. loans.

China Import Plans

Henderson said the union talks might result in GM ending plans to import models to the U.S. from China, which would have been a first from that country to the automaker’s home market.

U.S. auto demand is projected to shift toward smaller models again as fuel prices rise in the future, possibly signaling bigger profits from the types of fuel-efficient cars that GM now imports, Henderson said.

“Will imports from China survive? I don’t know,” Henderson said. “I don’t think it will be a substantial part of our volume going forward. That’s not how we make money.”

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