Changes to General Motors’ contract with the United Auto Workers union could save the automaker US$1.1bn or more in hourly labour costs, GM said in a report to the US treasury which has been released.
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This is the first time GM has attached a dollar value to the proposed changes, Reuters noted. Neither the company nor the UAW had disclosed what those changes entailed and the revised contract had not been put up for a ratification vote by union members.
The report noted that the UAW’s current four-year contract with GM and other Detroit-based automakers runs until 2011 and GM’s disclosure of projected cost sayings was the first time it had commented on the pending contract changes. It was contained in an update on its previous turnaround plan filed with the US treasury on Monday.
The automaker said the UAW contract changes would reduce its total annual hourly employment costs from $7.6bn in 2008 to $6.5bn in 2009 and the savings could be larger if it were able to bring in more lower-cost new recruits or temporary workers.
Terms of GM’s $13.4bn in emergency loans approved in late December by the Bush administration had set a target for GM to cut its hourly compensation in order to make it competitive with the US factory costs of Japanese automakers.
GM reportedly said in its filing that negotiations with the UAW had been continuing “in earnest” but said its ability to reach a deal with the union was “effectively linked” to reaching a deal with debtholders.
GM’s negotiations with the UAW centre on proposals to reduce some $20bn owed to a union-affiliated trust fund for retirees by $10bn by swapping preferred stock or other forms of equity for cash.
GM bond owners, who hold about $28bn of the automaker’s debt, are being asked to write off more than two-thirds of the amount they are owed.
Bondholders have been offered about $2.2bn in cash, $4.3bn in new debt and a stock-based payout that would give them 90% of the common stock of a recapitalised GM as part of a proposed debt swap, a person familiar with the matter told Reuters.
