GM gets concessions from Canadian Auto Workers

Some of the folks might find interest in the following article. The article is copyrighted and I shall withdraw if objections made:

http://www.bloomberg.com/apps/news?pid=20601103&sid=anpKKbR8jamE&refer=news




GM Gets Concessions From Canadian Union Before Probable Filing

By Katie Merx

May 26 (Bloomberg) -- The Canadian Auto Workers union, almost one month after amending its contract with Chrysler LLC, ratified a cost-saving labor agreement with General Motors Corp. yesterday to protect jobs in a probable June 1 bankruptcy.

The CAW, representing about 9,000 GM hourly workers, approved with 86 percent of the vote yesterday a deal that freezes pension payments until 2015 and pays new hires less. The United Auto Workers, GM’s U.S. union, will present a tentative labor package to plant-level leaders tomorrow in Detroit. Some locals have already scheduled votes this week.

GM Chief Executive Officer Fritz Henderson, who said a bankruptcy is “probable,” needs to get labor contracts amended so that a court-managed restructuring can proceed quickly. Many bondholders have said they will reject a proposal tomorrow to exchange $27 billion in debt for equity. GM will seek protection if fewer than 90 percent agree, Henderson has said.
“The conventional wisdom is that bankruptcy is imminent,” said Harley Shaiken, a professor at the University of California at Berkeley. He predicted the UAW would ratify its agreement, too. “The union wants to secure what it can before the bankruptcy, put pressure on the bondholders, and engage the larger political momentum out there.”

Lower Starting Pay
The CAW agreement would pay newly hired employees 70 percent of the full wage, increasing to 100 percent over six years, cut one week of paid time off and set the groundwork for negotiating a health-care trust to cover retiree medical costs, the union said in the highlights it shared with GM workers.

“This has been a grueling restructuring process, and no one has felt that more than our members and retirees,” CAW President Ken Lewenza said Sunday in a statement.

Approval of the deal positions the automaker to receive unspecified Canadian government aid the CAW said was necessary to keep GM Canada from being liquidated.

The UAW, representing about 54,000 GM hourly workers, hasn’t released the details of its tentative agreement.

People briefed at UAW meetings in Cleveland earlier this month said union retirees would give up dental and vision coverage as well as some prescription-drug coverage.
Those changes would match reductions that start as soon as July 1 for Chrysler retirees. Cuts in unemployment benefits and work-rule changes at GM also would be similar, the people said.
Ratification Predicted

Another round of buyout and retirement incentives are expected, the people said. About 67,500 union jobs have been eliminated through similar programs since 2005. The initial 2009 buyout consisted of a $25,000 voucher toward a new auto and $20,000 in cash.

GM has proposed that the UAW swap $20 billion of the automaker’s obligations to a retiree health-care trust for $10 billion in cash paid out over an unspecified period, and as much as 39 percent of the equity in a restructured company.

“I would be surprised if the UAW deal passed with less than 75 percent approval,” said Art Wheaton, an industrial- relations specialist at Cornell University. “If it doesn’t get ratified, they get whatever the bankruptcy judge thinks they should get. In terms of who has the most to lose in this, it’s the workers.”

GM has about 522,000 union retirees and dependents. Only current workers vote on new contracts.

GM is also trimming salaried positions, eliminating 14 percent already this year. The automaker plans for a new set of cuts this month that may be similar in scope, and focused on North America, people familiar with the matter said this month.

The largest U.S. automaker is rushing to complete as many pieces of its restructuring plan as possible in advance of the Obama administration’s June 1 bankruptcy deadline.

Bondholders’ Opposition
Bondholders have so far been unwilling to accept the company’s offer that they take 225 shares in a newly created entity for each $1,000 in principal before the automaker executes a 1-for-100 reverse split of the stock.

GM’s offer to exchange about $27 billion of bonds for a 10 percent equity stake expires at 11:59 p.m. in New York today. The ad hoc committee of GM bondholders called the offer “neither reasonable nor adequate” and proposed they get a 58 percent stake. Their offer hasn’t been adopted.

Individual GM bondholders have also opposed the automaker’s offer. A group that calls itself Main Street Bondholders has held rallies across the U.S. asking for inclusion in restructuring talks and better exchange terms.

A second group, GM Bondholders Unite, is trying to gather investors and hire legal representation to get “fair and equitable treatment” if GM files for bankruptcy, according to the group’s Web site.

Can’t Blame Unions
GM, propped up with $19.4 billion in emergency U.S. loans, said it expects to need $7.6 billion from the U.S. after June 1, President Barack Obama’s deadline to restructure outside of court.
The U.S. and Canadian union agreements are intended to help GM reduce hourly labor costs so it can return to profit after a restructuring with or without court protection.

Government officials in Canada had said the CAW needed to make its local labor costs comparable to those for Toyota Motor Corp. Canadian Prime Minister Stephen Harper said May 22 the government was “committed” to helping GM restructure.

The Canadian and Ontario governments haven’t said how much money might be available for GM and Chrysler LLC, which is already in bankruptcy in the U.S.

With new labor agreements, the unions can’t be made a scapegoat, said Gary Chaison, professor of industrial relations at Clark University in Worcester, Massachusetts.

“They can say, now, that they did all that they could,” Chaison said. “If GM goes into bankruptcy, they’ll be able to say it wasn’t their fault.”
To contact the reporter on this story: Katie Merx in Southfield, Michigan, at kmerx@bloomberg.net Last Updated: May 26, 2009 00:01 EDT
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facts from Reuter's article: http://www.reuters.com/article/newsOne/idUSN2236757120090526

UAW is meeting in Detroit for a vote today on benefit cuts. UAW hopes to have all votes counted by this Thursday. My note: retirees cannot vote and they are likely to take some big hits.

Canadian cuts are estimated around 30% in pay and benefits with 86% of workers voting in favor of cuts. Lord knows what is expected of American workers to cede on top of the outragous benefit cuts already in progress (my note again).