GM trades jobs for concessions in UAW contract

By Kevin Krolicki and David Bailey

DETROIT (Reuters) - General Motors Corp. agreed to keep 16 union-operated plants through 2011 in exchange for a cost-saving deal on health care and other concessions, according to the terms of the top U.S. automaker's tentative labor contract with the United Auto Workers union.

Under the deal, GM would shift a retiree health care obligation, estimated at over $50 billion, to a new trust in exchange for initial payments of $30 billion, a step analysts have said could save the automaker some $3 billion per year.

In another cost-cutting move, GM will offer more buyouts to UAW workers, creating room for new hires at reduced wages and benefits.

But GM promised to keep all 16 of its U.S. assembly plants through the four-year contract and spelled out ambitious investment plans for 12, including some that were at risk of closing.

The UAW's national council unanimously endorsed the contract at a meeting in Detroit on Friday, sending the deal to 73,000 GM workers for ratification in a series of votes expected to conclude by October 10.

"We are very, very pleased about the outcome of those discussions," UAW President Ron Gettelfinger told reporters.

Some analysts said the agreement's details raised questions about what GM had traded away in exchange for the ground-breaking deal to establish a health-care trust.

"I think they may have overpaid with job security," said Erich Merkle, an analyst at IRN Inc, who said it was hard to see how GM could justify keeping all the U.S. plants open.

But David Cole, chairman for the Ann Arbor-based Center for Automotive Research, said the concessions GM had won could amount to as much as $2,000 per vehicle.

"Once you back off these costs, it creates room for new investment," Cole said. "It really reverses the spiral."

GM and the UAW struck a tentative deal on Wednesday, but details had not been public until the union distributed the contract's highlights to its members on Friday.

The contract highlights show some wins for the UAW after 10 weeks of negotiations that culminated in a two-day strike this week -- the first national strike against GM since 1970.

UAW CLAIMS JOB SECURITY WIN

Union negotiators, who said they called the strike to win job security guarantees from GM, won commitments to keep U.S. assembly plants open and limit the jobs that can be performed by lower-cost new hires to "non-core" positions.

The new workers will be paid hourly wages starting below $15, half of the current UAW average. They also will have a cheaper health care plan and pension.