Big Three win union concessions to bolster aid bid

Published Thursday December 4th, 2008 ~ Mike Ramsey ~ Bloomberg

SOUTHFIELD, Michigan - General Motors Corp., Ford Motor Co. and Chrysler LLC, struggling to gain support in Congress for financial aid, won money-saving concessions from the largest U.S. auto union Wednesday.

The United Auto Workers agreed to delay contributions to medical funds and suspend a program that pays laid-off workers, giving the three automakers a boost as they seek to convince lawmakers they can repay any government loans. Their chief executive officers are set to testify Thursday and Friday on requests for a combined US$34 billion in financial help.

"This should be interpreted as a meaningful and a painful sacrifice," said Harley Shaiken, a labor relations professor at the University of California at Berkeley. The jobs bank, which has enabled UAW members to receive 95 percent of their take-home pay while laid off for extended periods, was "something the union worked over decades to achieve."

Lawmakers set aside a proposal for $25 billion in aid last month, requesting that the three companies’ CEOs return with a plan to sustain their businesses. On Tuesday, along with requesting more money, the automakers said they would slash their payrolls, shrink their dealership rosters and make other changes to ensure they’ll be able to pay the money back.

"When the Big Three automakers came before them three weeks ago, they were not offering a clear plan for viability over the long term," president-elect Barack Obama said at a news conference in Chicago where he announced New Mexico Governor Bill Richardson as his choice to head the Commerce Department.

While Obama has said he favors an industry rescue, GM and Chrysler say without aid they won’t be operating by the time he takes office in January. GM may not survive even with most or all of the $18 billion it requested unless U.S. auto sales stop falling, Chris Ceraso, an analyst at Credit Suisse Group AG, said Wednesday.

The concessions from the UAW, which had 464,910 members at the end of last year, will save money as well as help the automakers argue that they have labor’s backing in shrinking operations to remain viable. Last month, lawmakers called for the union to yield more to help keep the automakers from failing.

"There is going to be a lot of pressure" on union leaders from members who don’t want them to make the changes, president Ron Gettelfinger said Wednesday after an emergency leadership meeting in Detroit. "But we are going to step up and do it."

The industry’s U.S. auto sales plunged 37 percent in November from a year earlier, dropping to the lowest annual rate in 26 years. "We can’t have a union if we don’t have factories," said General Holiefield, a UAW vice-president who is the union’s liaison with Chrysler.

Still unresolved is how House Speaker Nancy Pelosi, a California Democrat, and Senate Majority Leader Harry Reid, a Nevada Democrat, propose to break the impasse with Republicans and President George W. Bush over the source of funds for a rescue. Democrats want to tap the $700 billion bank-bailout fund, and Republicans favor using an Energy Department loan program designed to retool factories for more fuel efficient vehicles.

Detroit-based GM, the largest U.S. automaker, said it must have $4 billion this month as part of its $18 billion request, while No. 3 Chrysler, based in Auburn Hills, Michigan, said it needs $7 billion right away. Dearborn, Michigan-based Ford, the second-biggest, requested a $9 billion credit line, but said it may not have to tap it.

George Fisher, GM’s lead independent director, said he expects the U.S. to keep the automaker alive until Obama takes office.

"There is a belief, stronger than a hope, that some very smart people in Washington do understand the importance of this issue," Fisher said in an interview. "Somehow, from somewhere in the federal government, we will get enough bridge-loan capacity to get through at least to the next administration."