Sources: UAW deal cuts bonuses, some raises-WEB ONLY

The United Auto Workers’ deal with Detroit’s three automakers limits overtime, changes work rules, cuts lump-sum cash bonuses and gets rid of cost-of-living pay raises, people briefed on the agreement said today.

The UAW announced yesterday that it reached the tentative agreement with General Motors Corp., Chrysler LLC and Ford Motor Co. over contract concessions, as GM and Chrysler sent plans to the Treasury Department asking for a total of $39 billion in government financing to help them survive.

Concessions with the union are a condition of the $17.4 billion in government loans that the automakers have received so far.

Base wages for UAW workers will remain the same, but the deal limits supplemental pay that laid-off workers receive while they collect unemployment benefits, said sources, who spoke on condition of anonymity because union members have not been told about the terms.

GM Chief Operating Officer Fritz Henderson declined to give details of the agreement today but said it takes major steps in cost and work rules toward narrowing the gap between U.S. automakers’ labor costs and those at Asian automakers’ U.S. plants.

The UAW said it won’t release details until it reaches agreements with the companies on payments into a union-run trust that will take over retiree health care expenses next year.

UAW spokeswoman Christine Moroski declined to comment today.

At issue is whether the union will accept payments to the health care trust in stock, instead of cash. Requirements of the government loans ask the union to take up half of what they’re owed as an equity position in the companies.
GM has to pay roughly $20 billion into the health care trust, while Chrysler must pay around $9.9 billion.

The union fears that if it takes too much stock, the trusts won’t have enough to pay benefits for hundreds of thousands of retirees and spouses. However, if the UAW refuses to take the stock and GM and Chrysler don’t satisfy the government’s loan terms, the companies could tumble into bankruptcy, putting those benefits into greater jeopardy.

Ford, which borrowed billions from private sources before credit markets tightened, has said it can make it through 2009 without government help and isn’t required to make the same changes, but Ford CEO Alan Mulally has said he expects his company to get the same concessions from the union so that it isn’t left at a disadvantage.

Ford owes $6.3 billion to its trust fund at the end of this year. Chrysler figures were unavailable.

All three companies agreed to fund the trusts, called voluntary employee beneficiary associations or VEBAs, as part of the landmark 2007 contract reached with the UAW. By doing so they move billions in liabilities off their books.

The trusts would pay health care bills for about 800,000 UAW retirees, spouses and dependents at the three companies. GM expects to save about $3 billion a year when the expenses are moved, while Ford says it will save $1 billion.

GM and Chrysler also are negotiating with their debt-holders so that the companies can swap two-thirds of their debt for equity as required by the loan terms.

GM Chief Financial Officer Ray Young said the company’s bondholder signed a letter saying that they were making progress with the company.

GM bondholders said in a statement it was “premature to comment on any specific terms” in their plan. They said they couldn’t “make an accurate or conclusive assessment of the company’s long-term viability without specific details of the tentative agreement” between GM and the UAW.