General Motors might give members of the United Auto Workers 401(k) retirement plans instead of pensions for the first time, Bloomberg reported Wednesday. The article pointed out that GM is attempting to roll back three key gains the union has made over the past fifty years: a fixed pension, company-paid healthcare and an annual raise. 
"They know the old ways don't work -- they're not competitive," said Morgan Keegan fixed-income analyst Pete Hastings. "They modernize their factories, and they have to modernize their pay scale." The proposed raise freeze is intended to help finance a union-run healthcare fund. If the fund is approved by the union, it would take $50 billion in future union healthcare costs out of GM's hands. The union might be willing to consider concessions on such core matters as healthcare and pensions in order to save jobs for its members. GM is shutting down 12 plants by the end of 2008 after 34,400 union workers agreed to retire or take buyouts. The union's four-year contract with GM expired September 14, and it has been on an hour-by-hour extension since then. In related news, the WSJ reports that the proposed UAW healthcare fund, or VEBA (voluntary employees' beneficiary association), "could make the union a significant player in financial circles" while at the same time providing new money management business to Wall Street banks and investment companies. "That potentially opens a whole door for all of us," said Hugh Johnson, chief investment officer at money manager Johnson Illington Advisors.
Sources: Wall Street Journal, Bloomberg, Reuters
Commentary: GM Closing in on Deal with UAW • Why Are Ford and Chrysler Letting GM Lead Negotiations With the UAW? • Wagoner is King in GM/UAW Talks
Stocks/ETFs to watch: GM. Competitors: F, DAI, TM. ETFs: PRFG, RPV
Earnings call transcript: General Motors Q2 2007
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