Despite intensified negotiations, General Motors and the United Auto Workers union likely won’t agree soon on a deal that could substantially cut the automaker’s health care costs, analysts and union members told the Associated Press (AP) on Thursday.
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“Meaningful concessions will take more time and will probably not be achievable until the 2007 contract,” Deutsche Bank Securities analyst Rod Lache reportedly said in a note to investors.
AP noted that GM, hurt by sluggish sales and declining market share, posted a $US1.1 billion loss in the first quarter and has been pressing the UAW to help it control health care costs, which could rise to $5.6 billion this year.
GM’s contract with the UAW expires in 2007, and so far the union reportedly has said it is unwilling to reopen that contract to negotiate lower health care costs – the union has said it will work within the contract, which could mean accepting higher co-payments or higher prices for prescriptions.
But the amount the UAW could save GM without reopening the contract might not even be enough to cover inflationary increases, the Associated Press said. In a research note, JPMorgan Chase & Co. analyst Himanshu Patel reportedly said the UAW could only save GM around 5% of its health care costs without reopening the contract – GM’s health care bill could rise as much as 12% this year.
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By GlobalDataAP noted that the amount GM wants to save is unclear – the Detroit Free Press and Wall Street Journal reported on Thursday that GM wants $1 billion in cuts this year and $1 billion in 2006 but GM spokeswoman Toni Simonetti wouldn’t confirm those numbers.
“We have not shared these numbers publicly, and I wouldn’t comment on any exchange of information we’ve had with the UAW,” Simonetti told the Associated Press. “Frankly, any outcome is highly uncertain right now.”
Oscar Bunch, the longtime president of UAW Local 14 in Toledo, Ohio, which represents 3,500 workers, told the news agency he didn’t know how much GM was seeking but he said a rumour that GM set a June 30 deadline to reach an agreement on health care is unrealistic – the UAW would have to get the approval of local leaders before accepting cuts, Bunch said, and the union hasn’t scheduled any votes.
GM spokesman Edd Snyder also told AP there is no deadline for making the changes GM is seeking.
The news agency noted that, in a speech to shareholders last week, GM chairman and CEO Rick Wagoner said the company hoped to reach an agreement soon with the UAW but also left open the possibility that GM could act on its own – it doesn’t have to get UAW approval to cut retiree benefits.
Bunch reportedly confirmed that GM has requested cuts in retiree benefits, a move the UAW vehemently opposes.
Bunch told AP the union is a long way off from striking over health care issues, in part because members know a strike would hurt sales and deepen problems for the world’s largest automaker.
If workers at his plant went on strike, “it would take us another 25 years to get back to where we are today, in terms of people having faith in the company,” Bunch reportedly said.
“There’s a lot of mistrust out there, but I can’t believe that GM would get themselves backed into that. I’m hoping that they’re a lot smarter than that,” Bunch added.
According to the Associated Press he also said GM needs to do a better job of explaining its financial burdens to members if it wants concessions on health care.
