Can GM live with UAW-Ford pact? Analysts disagree on whether company can afford contract

September 17, 1993|By Ted Shelsby | Ted Shelsby,Staff Writer

Although the United Auto Workers scored some significant gains in its tentative three-year pact with Ford Motor Co., it remained a bit premature for workers at the local General Motors Corp. assembly plant to celebrate.

Auto industry analysts offered conflicting assessments yesterday over whether the nation's largest automaker could afford to live with terms of the Ford agreement, which is expected to serve as the pattern for talks with GM and Chrysler Corp.

"GM can't afford it," said Arvid F. Jouppi, an analyst with Keane Securities Co., who has been following the auto industry since the early 1960s. "They are in a lot different situation than Ford."

But David E. Cole, director of the University of Michigan's Office for the Study of Automotive Transportation, was not so sure. As he sees things, the UAW negotiators went into the Ford talks with GM in the back of their mind.

"They were not about to negotiate something with Ford they could not take to GM," he said.

Mr. Cole noted that more than half of the 404,000 UAW members at the Big Three automakers work for GM. General Motors employs about 3,400 workers at its plant on Broening Highway, which makes the Chevrolet Astro and GMC Safari vans.

Details of the Ford-UAW pact reached late Wednesday have not been officially released, but union sources have disclosed some of its terms.

One of the major points of the agreement, which requires approval by Ford's 96,000 rank-and-file union members, would be a $300-a-month, or 17 percent, increase in pension benefits.

"That would be a most difficult aspect for GM to cope with," said Maryann N. Keller, an auto analyst and managing director of Furman Selz Inc. in New York.

Unlike Ford, which has a fully funded employee pension plan, Ms. Keller noted, GM's pension plan was under-funded by $14 billion. The gap is expected to grow to about $19 billion by the end of the year.

"That's a lot of money," she added, questioning whether GM could afford to settle for the same terms agreed to by Ford.

When it comes GM's time at the bargaining table, the UAW might have to back off on the pension gains, said David M. Garrity, who follows GM for Cleveland-based McDonald & Co. Investments. "GM may say it just can't afford it."

As a compromise, Mr. Garrity said, he would not be surprised if GM agreed to UAW representation on its board of directors.

Mr. Garrity said that GM would not stand to benefit as much as Ford from the dual pay scale because it was not expected to be hiring many new workers while it has excess manufacturing capacity and was looking to cut thousands of jobs.

GM declined to be drawn into the discussion. The company issued a brief statement from Gerald A. Knechtel, vice president North American Operations personnel, in which he said GM was "not going to publicly speculate" on how the Ford agreement might apply to GM. "We'll leave those kinds of discussions for the bargaining table," he said.

Although Mr. Garrity and Mr. Jouppi with Keane Securities agree that it would be difficult for GM to live with a Ford-like contract, neither were ready to predict a strike.

They both agreed that the UAW understands GM's problems and would be looking to cooperate with the company as much as it could for the long-term benefit of its workers.

On Monday, the UAW-Ford National Bargaining Council will begin meeting to review the contract. The council will take the contract to the 43 Ford locals, where ratification voting will be held over the next two weeks.

At the same time, the UAW will decide whether to negotiate next at General Motors Corp. or Chrysler Corp. Most observers believe Chrysler will be next because it will be easier to fit the pattern there, and because Chrysler reached agreement on a new deal with the Canadian Auto Workers without a strike earlier this week. That leaves the more difficult negotiations at GM for last. UAW President Owen Bieber hasn't hinted which way he is leaning.


The terms of the contract settlement between the UAW and Ford have not been disclosed and details provided by sources vary slightly. Here are the basic terms, according to wire reports:

A continuation of full health care coverage to current workers. New workers receive full health care benefits within six months instead of the current 18 months.

New hires will be paid 70 percent of full pay and reach full pay within three years. They now begin at 85 percent of full pay and reach parity in 18 months.

Preservation of Ford's job and income security fund that provides laid-off workers full pay for up to 36 weeks. After that, they are guaranteed 95 percent of take-home pay for the life of the contract.

Workers receive a 3 percent wage increase in the first year and lump-sum payments equal to 3 percent in the second and third years.

For workers retiring after 30 years, monthly pension payments increase 17 percent by the end of the three-year contract. Monthly payments that are now $1,800 will increase to $2,100 by 1996.

Workers will receive a one-time deferral of 22 cents an hour from cost-of-living adjustments to offset the cost of company-paid health care benefits and for allotments for vision, hearing and

dental care.

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