UAW Deal Slashes Bonuses, Some Raises
People briefed on the United Auto Workers' deal with Detroit's three automakers say it limits overtime, changes work rules, cuts lump-sum cash bonuses and gets rid of cost-of-living pay raises to help reduce the companies' labor costs.
The people spoke on condition of anonymity because union members have not been told about the terms. They say 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.
The UAW announced Tuesday that it reached the tentative agreement with General Motors Corp., Chrysler LLC and Ford Motor Co. over contract concessions. The union says 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.
The concessions are part of the automakers' restructuring efforts designed to maintain viability. Another key aspect to their plans are thousands of job cuts.
In a dramatic acknowledgment that conditions in the U.S. auto industry have grown significantly worse in just two months, GM alone said it would cut 47,000 jobs globally by the end of the year - 19 percent of its work force. It also said it would close five more U.S. factories, although it did not identify them, and phase out some of their brands, possibly including Saturn and Pontiac.
Chrysler said it will cut 3,000 more jobs and stop producing three vehicle models.
News of the impending job cuts has many communities that rely on auto manufacturing nervously waiting to find out how they'll be affected.
And despite the billions of dollars in government loans already allocated to prop up GM and Chrysler, the two companies may need more, reports CBS News correspondent Anthony Mason. They have received $17.4 billion so far, but filed plans with the government more than doubling that request to a staggering total of $39 billion.
GM said it could need up to $30 billion from the Treasury Department, up from a previous estimate of $18 billion. That includes $13.4 billion the company has already received. The world's largest automaker said it could run out of money by March without new funds and needs $2 billion next month and another $2.6 billion in April.
"We have a lot of work to do," General Motors Corp. Chairman and Chief Executive Rick Wagoner said. "We're still going at this with a great sense of urgency."
Read highlights of General Motors' and Chrysler's viability plans
GM's request includes a credit line of $7.5 billion to be used if the downturn is more pronounced than expected. But the automaker claimed it could be profitable in two years and repay its loans by 2017.
The requests pale in comparison to what it might cost taxpayers if GM or Chrysler go bankrupt, said Aaron Bragman, auto industry analyst for the consulting firm IHS Global Insight in Troy, Mich.
"These are not small, insignificant organizations," he said. "These are the lifeblood of American manufacturing."
The company looked into three bankruptcy scenarios, all of which would cost the government more than $30 billion, GM Chief Operating Officer Fritz Henderson said. The worst scenario would cost $100 billion because GM's revenue would severely drop, he said.
Although little is known about whether people would buy cars from a bankrupt automaker, some research "suggests that sales fall off a cliff," Henderson said.
Chrysler LLC requested $5 billion in new loans on top of the $4 billion it received in December. That's $2 billion more than expected.
Treasury Secretary Timothy Geithner, who will lead an Obama administration task force reviewing the plans, said his team would meet "later this week to analyze the companies' plans and to solicit the full range of input from across the administration."
Dearborn, Mich.-based Ford, which borrowed billions from private sources before credit markets tightened, has said it can make it through 2009 without government help.
GM and Chrysler's loan terms require them to make their labor costs competitive with those at Japanese automakers' U.S. factories.
The people said the deal also limits supplemental pay that laid-off workers receive while they collect unemployment benefits, but base wages for UAW workers will remain the same.
The people spoke on condition of anonymity because union members have not been told about the terms.
GM Chief Financial Officer Ray Young said the company hopes to exchange two-thirds of its roughly $28 billion in unsecured bond debt by the end of March. Bondholders, he said, 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 the 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.
House Speaker Nancy Pelosi said she was hopeful the plans would help lead to the "transformation of our domestic automobile industry into a viable, technologically advanced, and globally competitive manufacturing force."