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UAW-GM contract promises new products for US auto plants

A new agreement between the United Auto Workers and General Motors Corp. that requires GM to pay out at least $35 billion ( EUR24 billion) for retiree health care, establishes lower wages for thousands of new employees and offers an unprecedented number of promises for future work at U.S. plants was endorsed by local union leaders.

The agreement still is subject to a vote of GM's 74,000 UAW members, which should be completed by Oct. 10. UAW President Ron Gettelfinger said Friday he was confident members will support the agreement and that Ford Motor Co. and Chrysler LLC will match many of its terms.

"We're happy with this stuff," he said.

GM spokesman Dan Flores said both UAW workers and the company benefit from the agreement. GM did not release any specifics of the contract Friday; the company typically waits until the contract is ratified to make detailed comments.

"Not only does this new agreement enhance the security for employees and retirees, it enables GM to close competitive gaps in our business, and the projected competitive improvements will allow us to maintain a strong manufacturing presence in the U.S. with significant future investments," Flores said.

Gettelfinger said he had not yet decided whether the union would negotiate with Ford or Chrysler next, but he expects to make that call next week. Both automakers have extended their contracts with the union indefinitely.

The linchpin of the deal is a trust fund for retiree health care, known as a Voluntary Employees Beneficiary Association, or VEBA. GM, which has around 340,000 retirees and spouses, wanted to form the VEBA in order to get $51 billion (EUR36 billion) in retiree health care debt off its books.

The VEBA will be run by an independent board overseen by the UAW and will take over in 2010. GM will invest in the fund and cover retirees' health care costs until then. The automaker also will make payments to the VEBA when its funds are insufficient to provide benefits for at least 25 years.

In a two-page letter to retirees sent Friday, the UAW sought to calm retirees' fears about the VEBA, saying the union supports the fund because it protects retirees' benefits in the event of a downturn or bankruptcy. Retirees do not get to vote on the contract.

The UAW was seeking to protect jobs and slow its falling membership in this contract, and Gettelfinger said GM responded with "unprecedented product guarantees." GM committed to building current or existing products at 16 of its 18 U.S. assembly plants, according to the UAW's summary.

The union said assembly line workers will get economic gains totaling $13,056 (EUR9,208) over the life of the four-year contract. They will get bonuses in each year of the contract, including a $3,000 (EUR2,100) bonus when the contract is ratified, as well as cost-of-living increases.

But some workers will be making less than before.

New hires who are doing what are considered noncore functions, such as combining parts from suppliers to prepare them for the assembly line, managing parts and chemicals and driving finished vehicles, will make about half the starting hourly wage of $28.12 (EUR19.83) that assembly workers would make under the new contract.

There are more than 16,000 people doing noncore work in U.S. plants right now, the UAW said in its summary. Gettelfinger said there would be a buyout plan to replace noncore workers with new hires, but he said the details still were being worked out.

Under the tentative contract, 3,000 temporary workers also will get permanent jobs at the full-time wage rate, according to the union's summary. GM also would in-source 3,000 jobs now contracted to parts suppliers, the union said.

If the company's UAW members ratify the deal, its provisions likely will save the company about $3 billion (EUR2.1 billion) per year, which it can pump into the development of new products, according to several industry analysts.

GM shares rose 24 cents, or less than 1 percent, to close at $36.70 Friday on the New York Stock Exchange.