For Detroit, it's prove it time

Make no mistake. General Motors Corp. executives are ecstatic about the tentative agreement they have reached with the United Auto Workers. Not only did they get to offload $51 billion in health care liabilities into a private trust, thus saving $1.6 billion or more in cash outlays. The company can also replace retirees with workers who make somewhere in the neighborhood of $14 to $16 an hour. J.P. Morgan analyst Himanshu Patel says that concession should save GM anywhere from $300 million to $1 billion a year. That billion dollars is on the extreme long end; it assumes 24,000 people leave GM in the next four years. Whatever the number, the concession goes against long-standing union mandates that everyone on the assembly line should make the same money. Getting the UAW to agree to a two-tiered wage structure for new line workers isn’t far from getting the Vatican to let priests marry.

To continue reading this article you must be a Bloomberg Professional Service Subscriber.