A new era for automakers?
Philadelphia Inquirer, September 26th, 2007
The contract agreement that ended a 41-hour strike against General
Motors Corp. may transform the competitive landscape of the U.S. auto
industry as it struggles to compete against efficient Japanese rivals.
The company achieved its goal of unloading about $50 billion in
health costs for its 340,000 retirees and their spouses, but the
tentative deal also wrung promises out of GM to keep jobs at its U.S.
plants rather than moving work overseas.
"This begins to solve the significant legacy cost for the domestic
auto producers, which has just put them at such a comparative
disadvantage to the foreign competition," said David Sowerby, a
portfolio manager at Loomis Sayles & Co. in Bloomfield Hills, Mich.
The agreement was reached about 3 a.m. yesterday, and, an hour
later, the United Auto Workers union officially called off the strike,
which began late Monday morning.
One of the struck plants is in Newport, Del., near Wilmington. Its
1,400 UAW members produce 4,000 Pontiac Solstice, Saturn Sky and Opel
cars a month.
Should the four-year deal be approved by GM workers, Ford Motor Co. and Chrysler L.L.C. would seek similar UAW contracts.
The groundbreaking settlement allows GM to move its unfunded
retiree health-care costs from its own books into an independent trust,
called a Voluntary Employees Beneficiary Association, administered by
the UAW. The company will contribute 70 percent of the money for the
trust fund, or nearly $36 billion. The rest will come from the UAW's
investment returns on that money.
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