GM, Chrysler, and Ford Win Union Concessions to Bolster Aid Bid (Update3)
By Mike Ramsey
Dec. 3 (Bloomberg) -- General Motors Corp., Ford Motor Co. and Chrysler LLC, struggling for support in Congress for aid, won money-saving union agreements to delay contributions to medical funds and suspend a program that pays laid-off workers.
Today's move by the United Auto Workers gives GM, Ford and Chrysler a boost as their chief executive officers prepare to testify tomorrow and Dec. 5 on their requests for $34 billion in financial help. Lawmakers have pressed the companies to show how they will survive and repay any government loans.
``This should be interpreted as a meaningful and a painful sacrifice,'' said Harley Shaiken, a labor relations professor at the University of California at Berkeley. The jobs bank was ``something the union worked over decades to achieve.''
Aid proposals sent yesterday to Congress by the automakers are more than a third larger than the $25 billion request set aside by lawmakers last month, heightening pressure for action as a deepening auto slump quickens GM's rush toward a default.
While President-elect Barack Obama has said he favors an industry rescue, GM and Chrysler said they won't be operating by the time he takes office in January without the money now stalled by a deadlock in Congress. Democrats want to tap the $700 billion bank-bailout fund, and Republicans favor using Energy Department loans.
Senate Majority Leader Harry Reid believes Democrats may have to consider other options because he doesn't see enough support for the party's plan, his spokesman, Jim Manley, said today.
Obama's View
Obama said lawmakers were right to demand that the companies' CEOs provide a plan to sustain their businesses in order to get federal aid, and their latest efforts are ``a more serious set'' of proposals.
``When the Big Three automakers came before them three weeks ago, they were not offering a clear plan for viability over the long term,'' Obama said at a news conference in Chicago where he announced New Mexico Governor Bill Richardson as his choice to head the Commerce Department.
GM rose 5 cents, or 1 percent, to $4.90 at 4:01 p.m. in New York Stock Exchange composite trading, while Ford gained 15 cents to $2.85.
The concessions by the UAW, the industry's biggest labor group, will save money as well as help the automakers argue that they have labor's backing in shrinking operations to remain viable.
The union will revise the payment schedule for UAW-run trust funds for retiree medical care that were part of a 2007 contract, President Ron Gettelfinger said today after an emergency leadership meeting in Detroit.
Interest Payment
He said an interest payment for the delay would be agreed upon by the companies and the UAW, which had 464,910 members at the end of last year for the lowest total since the Great Depression. The first contributions were due in January 2010, and the postponement would need approval by a federal judge.
``There is going to be a lot of pressure'' on union leaders from members for making the changes, Gettelfinger said. ``But we are going to step up and do it.''
So-called jobs banks have enabled UAW members to receive 95 percent of their take-home pay while laid off for extended periods. The 2007 contracts put new limits on the jobs banks, which now cover 2,800 employees at Ford and Detroit-based GM.
Contract Changes
Union leaders can suspend the jobs banks because of changes in business conditions at the parent company without changing the contract. Permanent alterations to the labor agreement need approval from rank-and-file union members. UAW leaders for GM, Ford and Auburn Hills, Michigan-based Chrysler will discuss other contract amendments with members later today.
``We can't have a union if we don't have factories,'' said General Holiefield, a UAW vice president who is the union's liaison with Chrysler.
Gettelfinger will also testify tomorrow in Congress. During a hearing last month, lawmakers called for the union to yield more to help keep the automakers from failing.
The UAW's move is a step ``in the right direction,'' Representative Brian Bilbray, a California Republican, said today in a Bloomberg Television interview. ``I am very pleased to see that.''
Still unresolved is how House Speaker Nancy Pelosi, a California Democrat, and Reid, a Nevada Democrat, propose to break the impasse with Republicans and President George W. Bush over the source of funds for a rescue.
``If the administration continues to oppose using the TARP program to address this problem, we will have to find an alternative,'' Reid spokesman Manley said, using the acronym for the Troubled Asset Relief Program, as the bank bailout is formally known.
Energy Department Loans
The $25 billion Energy Department loan program to retool factories is no longer enough to cover the three U.S.-based automakers' needs after a worsening economy forced them to boost their requests. November auto sales plunged 37 percent to the lowest annual rate in 26 years.
GM, the largest U.S. automaker, said it must have $4 billion this month as part of its $18 billion request, while No. 3 Chrysler said it needs $7 billion right away. The request by Dearborn, Michigan-based Ford is for a $9 billion credit line it said it may not have to tap.
GM had its rating on $43 billion of debt cut to Ca, the second-lowest grade, from Caa2 by Moody's Investors Service today. Chrysler's credit rating was also cut to Ca from Caa2. Moody's reaffirmed Ford's Caa1 rating on $26 billion of debt. The debt of all three carmakers is rated as junk.
George Fisher, GM's lead independent director, said today he expects the U.S. to keep the automaker alive until Obama takes office.
``There is a belief, stronger than a hope, that some very smart people in Washington do understand the importance of this issue,'' Fisher said in an interview. ``Somehow, from somewhere in the federal government, we will get enough bridge-loan capacity to get through at least to the next administration.''
To contact the reporters on this story: Mike Ramsey in Southfield, Michigan, at mramsey6@bloomberg.net;
Last Updated: December 3, 2008 20:23 EST |
