GM wants to lock in cost cuts in talks

July 22, 2011

GM wants to lock in cost cuts in talks

/ The Detroit News

General Motors Co. heads into labor talks this year a leaner, profitable company determined to preserve hard-won gains achieved during bankruptcy restructuring and to keep long-term, fixed costs in check.

The Detroit-based company, the largest of the three domestic automakers, also will seek to further reduce health costs, establish more flexible work rules and recast the hourly profit-sharing formula to bring it more in line with that of its salaried workers, a person familiar with GM’s plans said this week.

UAW President Bob King also wants to see a richer profit-sharing plan for his members, but said he won’t make any further concessions on pay and benefits.

GM finds itself in a unique situation this year: Like Chrysler Group LLC, its unionized workers can’t strike under terms added to their contract in 2009, as part of the federal bailout.

After years of big losses, the company is making money and last year posted a $4.7 billion profit — its first since 2004. UAW workers, in turn, received an average $4,300 profit-sharing check this year, GM’s largest ever.

Heading into talks, which officially kick off Wednesday, GM wants to avoid additional long-term fixed costs, such as automatic pay and cost-of-living increases; it seeks, instead, to reward its 49,000 hourly workers with a richer profit-sharing formula.

Worker bonuses are now based on U.S. earnings, but GM wants to base the formula on other factors, as well, to make it more like salaried bonus plans. The company also wants to simplify the formula, so it’s easier to calculate.

GM’s payouts historically have been much lower than those at Chrysler and Ford Motor Co.

Prior to this year, GM’s highest payout was $1,775 in 1999. By contrast, Chrysler’s largest payout was $8,100 that same year; Ford’s was $8,000.

Health care also will be a big topic at the bargaining table this year for GM, which will seek to reduce its costs. GM’s hourly workers currently pay about 7 percent of their health costs; the average for private industry overall is closer to 30 percent.

Once the nation’s largest private purchasers of health care, the automaker made great strides in reducing costs in 2007, when the union’s health care trust assumed responsibility for retiree health care.

In 2006, GM spent about $4.8 billion a year on health care for 1.1 million active workers, retirees and dependents. Last year, it spent $665 million on active workers and dependents; the figure doesn’t include retirees now covered by the union’s health trust, also known as the Voluntary Employees’ Beneficiary Association, or VEBA.

GM wants to modernize and make further adjustments to the plan, this person said, but declined to go into details. GM wants to make it easier to move workers between plants and states, will also seek more flexible work rules, and greater leeway in using temporary workers.The UAW may be open to this one, said Kristin Dziczek, director for labor and industry at the Ann Arbor-based Center for Automotive Research.

“But in exchange for two of their main goals: job security, probably as evidenced through product commitments or some form of longevity, and a significant share in the company’s success,” she added.

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