Upcoming UAW Negotiations 'Do or Die' For Detroit's Big Three

Industry experts are going as far as to call next month's talks between the Big Three U.S. automakers and the United Auto Workers Union [UAW] 'do or die' for the U.S. auto industry. With the Three bleeding large amounts of red ink (Ford has mortgaged many of its assets in hopes it can become profitable), and the U.S. auto industry in the midst of its worst crisis in decades, it will need to win massive concessions from UAW President Ron Gettelfinger, with auto workers agreeing to a $25-$30 an hour cut in compensation and benefits. In addition, the Big Three will attempt to pass on to the union (through the establishment of a union-run healthcare fund) more than $110 billion in long term healthcare liabilities currently being saddled by the automakers. Gettelfinger suggested in March that the Union already agreed to sufficient healthcare cuts in 2005, saving the auto companies billions, and that further concession were unfair and unlikely to be agreed to by the UAW's rank and file. GM compensates its workers $73 an hour in salary and benefits versus the just $48 an hour Toyota lays out for its employees. If the Big Three can't get the UAW to agree to cut costs on pare with Japan's Big Three, it is unclear how much longer they can avoid bankruptcy.

Sources: Wall Street Journal, AP, Reuters I II,
Commentary: Big 3 May Propose UAW-Run Health Fund In Talks Next Month • Are Domestic Auto Manufacturers Losing Consumer Interest? • Note to US Auto Manufacturers - Adapt or Die
Stocks/ETFs to watch: General Motors (GM), Ford (F), Chrysler (DCX). Competitors: Toyota (TM), Honda (HMC), Nissan (NSANY)
Conference call transcripts: General Motors Q1 2007 Earnings Call Transcript • Ford Motor Q1 2007 Earnings Call Transcript • DaimlerChrysler Q1 2007 Earnings Call Transcript

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