July 27, 2011 / 6:35 PM / 7 years ago

GM CEO: UAW talks can't lead to higher labor costs

HAMTRAMCK, Michigan (Reuters) - General Motors Co (GM.N) hopes to retain its cost-competitive structure after its negotiations with the United Auto Workers union, Chief Executive Dan Akerson said on Wednesday at an event to mark the start of the talks.

“The world is really quite brutal,” Akerson told plant workers and journalists at the Detroit-Hamtramck auto plant.

“It does not tolerate weakness in business. It does not tolerate uncompetitive cost structures,” he said.

Before GM’s 2009 bankruptcy restructuring, the automaker was burdened with high labor costs and overproduction. Now the company is “wildly successful,” Akerson said.

“We have one today,” Akerson said, referring to the automaker’s streamlined cost structure. “I hope we’ll have one upon conclusion of these negotiations.”

The current four-year pacts between the UAW and the three major U.S. automakers expire September 14. On Monday, Chrysler formally opened talks with the UAW, and Ford is scheduled to open them on Friday.

Akerson indicated GM would post a sixth straight quarterly profit. Analysts expect the automaker, due to report second-quarter results on August 4, to post a profit of $1.20 per share, according to Thomson Reuters I/B/E/S.

The negotiations are the first formal contract talks since the establishment of a retiree healthcare trust that greatly lowered the automaker’s all-in labor costs in 2007.

Akerson said he did not think healthcare will be a major stumbling block in the talks but said it is up to the union negotiators to determine if healthcare will be a major issue.

As he spoke at a press conference after the opening ceremonies at the plant, Akerson nodded to indicate that he was sitting next to UAW President Bob King and the UAW’s vice president for GM relations, Joe Ashton.

Neither Akerson or Ashton would say how long they think the two sides will be at the bargaining table before reaching an agreement. They also declined to say which issues are expected to be major hurdles.

GM’s labor costs, along with those of Ford Motor Co (F.N) and Chrysler Group FIA.MI, were cut when the Voluntary Employee Beneficiary Association took retiree healthcare costs off automakers’ balance sheets.

    GM’s all-in hourly worker labor costs have fallen to about $56-$57 from $78 four years ago, according to the Center for Automotive Research.

    King, who has said the union will not allow more wage and benefit concessions in this year’s talks, said he hopes for “creative problem solving” in the negotiations, a concept that was echoed by Cathy Clegg, GM’s head of labor relations.

    A year after he first announced a renewed UAW effort to organize the foreign automakers with U.S. plants, King said doing so will help GM, Ford and Chrysler keep their labor costs competitive.

    Ford’s “all-in” labor costs are about $58 per hour and Chrysler’s are about $50-$51, according to CAR. That compares with about $51-$56 for Toyota Motor Corp’s (7203.T) U.S. auto workers.

    “We’re going to organize the transplants in America because we are going to level the playing field,” said King during the opening ceremonies inside the plant, where GM makes the hybrid-electric vehicles Volt and Ampera.

    Akerson said maintaining competitive labor costs is essential to the success of GM, and particularly in keeping auto worker jobs in the United States. This, he said, is key to the overall success of the country and its economy.

    “You are not going to be a great country, a great power, by flipping hamburgers,” said Akerson.

    Editing by Steve Orlofsky

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