Auto Bailout: GM Starts Negotiations with Union Posted: Jan. 07, 2009 10:01 a.m.

General Motors has opened negotiations with the United Auto Workers to determine what concessions unionized workers will have to make to keep America’s largest automaker from bankruptcy. The company has now received the first $4 billion of $9.4 billion in federal bailout funds, but has only until March 31 to submit a plan to the White House outlining the steps it will take to return to profitability. If federal officials are not convinced by the plan, they can recall the loan - forcing the company into bankruptcy.

The Detroit News reports, "GM has pledged to revamp labor contracts, reduce debt and shrink the number and type of vehicles it produces to satisfy conditions imposed" by the White House bailout. But the automaker "needs financial concessions to implement a restructuring plan unveiled last month that includes eliminating up to 31,000 jobs, shutting nine plants and renegotiating its 2007 labor contract with the UAW. GM also wants to close 1,750 dealerships, possibly eliminate Saturn and convince banks and bondholders to swap some of the company’s debt for equity."

Autoblog comments, "The UAW has resisted wage and benefit cuts, but without union compromise GM could be forced to file bankruptcy... something none of the players wants to see happen."

UAW resistance to wage cuts, according to some negotiators, was what killed an earlier auto bailout plan proposed in Congress in November.

The union, however, has already agreed to some cost-cutting measures. The News notes, "The UAW has said it will suspend its controversial jobs bank program, delay payments to the union-run trust fund for retiree health care and modify the national labor agreements to allow for more potential wage and benefits cuts." But union leaders have reportedly "told local plant officials the union wants an ownership stake in GM and a seat on the automaker’s board in exchange for further concessions."

Other automakers are watching the talks closely, as the News reports, "any concessions GM gets will be sought by rivals Ford Motor Co. and Chrysler."

Union negotiators may also want to delay any concessions until a new President takes office. Edmunds Inside Line points out, "On Monday, United Auto Workers President Ron Gettelfinger complained on the UAW blog that "the terms of the loans approved by President George W. Bush single out members of our union, by demanding steeper and faster concessions from the UAW than from any other part of the industry." Gettelfinger may have previewed what we can expect from the current negotiations, concluding his post, "That’s not right, and we’ll work with the Obama administration and the new Congress to implement a more balanced approach."