General Motors and Ford began talks with the United Auto Workers today in what will probably be the most important round of contract talks the Detroit automakers have had in decades. At issue is the amount of money GM and Ford, as well as Chrysler, will continue to pay toward the healthcare of hourly employees and retired hourly employees. UAW president Ron Gettelfinger, like most UAW bosses, plays hardball. His refrain of the last few months concerning Ford is almost comical in its defiance of reality about the ailing automaker.: “I’d just say (Ford’s financial condition) depends on who you talk to,” Gettelfinger said. “And they’ve got a lot of cash, by the way, the company does. So that’s not an issue for us right now.” Make no mistake. Gettelfinger is not obtuse or deranged. He knows Ford lost $12.6 billion last year and had to mortgage itself up the hilt to raise $23.4 billion in the debt markets. But Gettelfinger has to look like a pitbull to his membership. In negotiation meetings, people tell me, he is probably more realistic about the state of the business than any of his predecessors. GM last year spent $4.8 billion on insurance and medical care for its workers and retirees. But its Ford, say some onlookers and analysts, that has to get a new deal from the UAW or else risk falling short of its target of profitability by 2009. What GM and Ford are hoping for is to off-load the healthcare liability to the UAW to manage by paying some percentage of the long-term liability now. “This is critical for Ford…I’m not sure they will make it otherwise,” said one Ford outsider who counsels the company’s management. GM and Ford hourly labor costs — $73.26 and $70.51, respectively — are about $30 higher than those of their Japanese rivals operating U.S. plants, according to data compiled by the automakers. Much of that gap represents the cost of higher pensions and health-care costs for retirees, according to the automakers. The UAW’s current four-year contract with the three Detroit-based automakers expires Sept. 14. Gettelfinger has been very cooperative with Ford in getting work-rules changed and letting individual plants negotiate with Ford to improve their chances of staying open. The UAW’s membership has been decimated in recent years. And the economy in Michigan, where a lot of Big Three jobs are located, is in the tank for loss of the jobs that have been cut already. Look for a pretty progressive agreement and for the UAW and retirees to pay more of their own healthcare costs. The Golden Goose that used to pay 100% of their medical costs is long dead. And Gettelfinger knows it.
Before it's here, it's on the Bloomberg Terminal. LEARN MORE