GM Closing in on Deal with UAW

General Motors and the United Auto Workers union made progress towards a labor deal over the weekend, but issues remained outstanding before a new contract can be signed to replace the four year pact that expired Friday. In the interim, the contract is being extended on an hour by hour basis. "The two sides have made progress, but a number of issues remain that we have to close the gap on," said one person familiar with the negotiations. The largest U.S. automaker was chosen by the union as its "strike target" last week; the UAW hopes to reach an agreement with GM and then adapt it to Ford and Chrysler. The three are hoping to cap costs to help make them more competitive with Asian carmakers. The contracts cover 180,681 active workers and 419,621 retirees and surviving spouses at the three. Retiree costs have been a key issue, and GM and the union reportedly have agreed to take some $50B in retiree healthcare obligations, which GM claims add as much as $1,200-$1,500 to a cost of the car, off the company books, but other terms still need to be hammered out. Ford agreed to healthcare concessions in 2005.

Sources: Wall Street Journal, Financial Times, Bloomberg
Commentary: Why Are Ford and Chrysler Letting GM Lead Negotiations With the UAW • Wagoner is King in GM/ UAW Talks • What Would a Successful Negotiation With the UAW Look Like
Stocks/ETFs to watch: GM, DCX, F. ETFs: IYT, IYJ, XLI
Earnings call transcript: General Motors Q2 2007

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