UAW optimistic it can help GM, chief says

Changes must be made in existing pacts, he adds

September 09, 2005|By BLOOMBERG NEWS

DETROIT - The United Auto Workers union is optimistic it can help General Motors Corp. reduce health care costs, as long as changes are made within the restrictions of its members' existing contracts, the UAW's president said yesterday.

"We are willing to continue working with General Motors, within the framework of our national agreement, to reduce costs in health care and other areas," UAW President Ron Gettelfinger said in a speech to the Economic Club of Detroit yesterday. "We're optimistic we can find ways to do that."

GM spokesman Stefan Weinmann said the company, the world's biggest automaker, would not comment on the continuing union discussions.

GM Chief Executive Officer G. Richard Wagoner Jr. is under increasing pressure from investors, analysts and ratings companies to get union cuts after a first-half loss of $1.39 billion. Moody's Investors Service last month joined Standard & Poor's and Fitch Ratings in reducing the company's credit rating to high-risk, high-yield junk and said it might cut the rating again if the automaker fails to get UAW concessions.

"It appears that the UAW's willing to make some concessions within the framework of their contract, but that's not enough frankly for General Motors," said Brett Hoselton, an analyst with KeyBanc Capital Markets in Cleveland. "They're going to need more help than that."

Gettelfinger said last month that GM had failed to convince the union that its challenges are steep enough to warrant health care concessions.

Yesterday, Gettelfinger said, "I just go back and remind everybody of this: General Motors paid out $1.1 billion in dividends. They've got huge cash reserves. All these factors we're taking into consideration."

He said the union's current contract shows it is already compromised on health care costs, including accepting bigger co-pays for prescriptions.

GM contends that its health expenses for employees, retirees and dependents make it uncompetitive against Toyota Motor Corp. and other rivals by adding more than $1,500 to the cost of each U.S. vehicle sold.

Gettelfinger said the automaker is hindered by consumers' outdated perceptions that GM products don't have high quality. "One hit product could make a huge difference" for GM's finances, Gettelfinger said.

The union has hired bankers including Lazard Ltd. to study GM's finances and determine if health care cuts are necessary. Gettelfinger told reporters that the report has not been completed.

UAW Vice President Richard Shoemaker told reporters yesterday that the union would prefer that Delphi Corp., GM's largest supplier and a former unit, not declare bankruptcy to cope with falling profits and rising costs.

Delphi, the biggest U.S. auto parts maker, is talking with GM and the union about financial aid and ways to reduce its labor costs after four straight quarterly losses. Delphi Chief Executive Officer Steve Miller said in August that he will take the company's U.S. operations into bankruptcy if agreements can't be reached.

Miller has said an Oct. 17 change in U.S. bankruptcy laws will be a consideration in deciding whether to file. Delphi, spun off from GM in 1999, lost $338 million for the three months that ended June 30, its fourth-straight quarter without a profit.

GM also said yesterday that it will end employee discounts for all buyers Sept. 30 and turn to lower list prices to help it sell 2006 models after sales fell in August. The automaker has been using employee discounts since June to clear U.S. inventories of 2005 models and halt market share losses to competitors such as Toyota. GM's North American auto unit lost $2.8 billion in the first half of 2005.

GM's shares fell 60 cents to close at $32.40 yesterday on the New York Stock Exchange.

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