UAW / GM Reach Tentative Agreement; Strike Halted

The United Auto Workers union announced early Wednesday it has reached a tentative contract agreement with General Motors and has halted the nationwide strike it began Monday. "We feel very confident it will be ratified," said UAW President Ron Gettelfinger at a news conference. "I think overall [GM workers] will be very pleased with the outcome of this negotiation and the job security that's associated with it." Ratification, which will require approval by a majority of GM workers, is expected to begin this weekend. Gettelfinger did not go into detail, but did say the agreement involves a historic healthcare arrangement that will transfer responsibility for retiree healthcare to a UAW voluntary employee beneficiary association, or VEBA. GM is expected to contribute a one-time payment upward of $30 billion to the VEBA, but it should result in an annual savings for the automaker of $3 billion. The VEBA will relieve GM of over $50 billion in healthcare costs currently owed to GM-UAW retirees and their spouses. "The projected competitive improvements in this agreement will allow us to maintain a strong manufacturing presence in the United States along with significant future investments," said GM CEO Rick Wagoner.

Sources: Reuters, Wall Street Journal, Bloomberg
Commentary: Why the GM Strike Makes Sense • GM Should Be Able to Weather Short Strike - Ratings Agencies • The General Motors-UAW Dance
Stocks/ETFs to watch: GM. Competitors: F, DAI, TM. ETFs: PRFG, RPV
Earnings call transcript: General Motors Q2 2007

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