Still far apart on health cuts


Union assembles experts to weigh auto firm's claims


DETROIT - After three months of intense talks, General Motors Corp. and the UAW still appear no closer to an agreement that would lower GM's soaring employee health care costs, despite the automaker's insistence that a cost-cutting deal is a top priority to counter mounting losses.

The UAW said yesterday that it had assembled a team of internal and external financial and legal analysts to examine GM's claims that it needs to tackle employee health care costs.

Wall Street auto analysts, who earlier had hoped for a deal in June, now say it could be months before any kind of deal is reached - if at all.

One Wall Street analyst said the fact the UAW has just hired outside advisers to study GM's finances sounds like what happens at the start of talks, not near the end.

GM is pressing the UAW to either reopen the existing four-year contract two years into it, or help GM find ways within the contract to trim the $5.6 billion in cash that GM expects to spend on health care this year.

A prolonged delay could lead to a showdown between GM and the UAW.

GM Chief Executive Officer Rick Wagoner warned last month that GM could act without cooperation from the UAW.

UAW President Ron Gettelfinger said that GM would make "a huge mistake" if it unilaterally forced cuts in health care or other contract benefits.

No deal imminent

Plant-level UAW officials familiar with the talks told the Detroit Free Press that no deal is imminent, but they hope to get an update on the talks at a Aug. 22 meeting of plant-level UAW officials in Chicago.

"We expect they will tell us something about these talks then. We've brought in these professional people to study GM's numbers and maybe they can tell us the truth about GM's situation," said Jim Kaster, president of UAW Local 1714 at GM's Lordstown, Ohio, plant. He said the meeting had originally been scheduled for October, but was moved up.

"There doesn't seem to have been a lot of movement on the talks," said Kaster, who has 1,600 members working to build the Chevrolet Cobalt.

Wagoner said at the company's annual meeting June 7 that "it is crystal clear that we need to achieve a significant reduction in our health-care cost disadvantage, and to do so promptly."

UAW hires advisers

But six weeks after Wagoner's warning, the UAW hired investment bank Lazard Ltd. and the law firm of Cleary Gottlieb Steen & Hamilton LLP, which are both based in New York and known for working on corporate restructuring.

Also on the team are financial advisers from Leon Potok & Co. of New York, and an actuarial firm that that specializes in assessing health care issues.

"We want to be very thorough, do this the right way," UAW spokesman Paul Krell said of the GM assessment. "We're not working to any particular deadline or timetable."

Gettelfinger told the Free Press in an interview last week that the work could take much of the summer, and he has "a lot of doubt" that the union will go along with broad measures to cut costs, noting that the automaker continues to pay a dividend to shareholders.

Earlier this week, GM posted another huge loss, its third straight quarter in the red. For the April-June period, GM lost $286 million.

"Health care costs are still a significant drag," said GM Chief Financial Officer John Devine in a conference call Wednesday.

But he declined, despite being pressed several times, to give any details on talks with the UAW.

"As soon as we have something to say there we will," said Devine. "But the discussions with the UAW are continuing and obviously a very high priority around here."

GM will host Wall Street auto analysts in Detroit on Aug. 30. Analysts say they expect GM will update them on the talks, but likely not have a deal to announce.

Equivalent `sacrifice'

"I don't think anything is imminent. The UAW is just getting into the financial details. I also think the UAW wants to see an equivalence of sacrifice, like a dividend cut," said Robert Hinchliffe, auto analyst for UBS Inc.

He added UAW members would be impressed if Wagoner were to work without a salary this year the way Ford Motor Co. Chief Executive Officer William Clay Ford Jr.

Hinchliffe and other analysts said the UAW is trying to make Delphi Corp. part of the negotiations, hoping to get GM to help the auto parts giant, in return for UAW concessions. Delphi is a former GM operation and has struggled lately.

Delphi further complicates the talks and delays a resolution, analysts said.

"We believe that a significant package is unlikely to be announced before the fourth quarter, given the complexity of the issues," Wall Street analyst Brian Johnson of Bernstein Research said in a note to clients.

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