UAW, GM talks to continue

DETROIT -- Negotiators for the United Auto Workers union and General Motors Corp adjourned labor talks Monday night, leaving 73,000 GM employees working without a new contract three days after their old one expired.

GM spokeswoman Katie McBride said the two sides agreed to return to the bargaining table in Detroit this morning after breaking off talks around 8 p.m.

The union has indicated a willingness to agree to a cost-saving fund for health care and lower wages for new hires but has insisted it needs job-security provisions in return, a person familiar with the union's stance said Monday.

UAW Vice-President Cal Rapson has told GM that without a commitment to maintain U.S. factory jobs by the top U.S. automaker, he will not be able to get other changes it is seeking ratified by the union's membership, the person said.

Rapson spearheaded the union's contentious negotiations with bankrupt parts supplier Delphi Corp and won credit for helping craft a compromise agreement that allowed the former GM subsidiary to cut labor costs, while protecting the jobs of existing workers.

Representatives of GM and the UAW declined to comment on the content of the private talks that began eight weeks ago and kicked into high gear on Friday, when the UAW agreed to extend its contract with GM on an hour-to-hour basis.

The outcome of the contract talks is seen as crucial to efforts by the three Detroit-based automakers -- GM, Ford Motor Co and Chrysler LLC -- to recover from combined losses of $15 billion last year and sales difficulties that have driven their slice of the U.S. market below 50 percent.

Michael Robinet, an auto industry analyst at CSM Worldwide, said it was likely the two sides were making progress as they hashed out an overhaul of contract language covering hot-button areas such as benefits, work rules and job security.

"They have a team of lawyers working on this because it's like trying to write an entire phone book in a short period of time," Robinet said.

Any tentative pact between GM and the UAW would have to be ratified by a majority of GM's union-represented workers.

GM, Ford and Chrysler said before talks began that they were seeking sweeping concessions from the UAW to close a cost gap with Toyota Motor Corp they say amounts to more than $30 per hour for the average factory worker.

DEAL OR NO DEAL?

As the UAW's strike target, GM was expected to be negotiating a contract that would be used as a pattern for the union's talks with Ford and Chrysler.

But the talks, which were under way at a GM building just blocks from its Detroit headquarters, have taken some unexpected turns since last week.

After hitting an apparent snag, the UAW singled out GM as its "strike target" Thursday -- a term it had avoided in more collegial negotiations in 2003.

Rival automakers Ford and privately held Chrysler quickly signed contract extensions with the UAW, clearing the way for their factories to keep operating.

The early stages of the labor talks focused on a complex plan to allow GM to cut billions of dollars in expenses for retiree health care by paying into a new UAW-aligned trust fund, according to people close to the talks.

Wall Street analysts have been optimistic GM would clinch a deal to slash health-care costs totaling $4.8 billion in 2006. GM's unfunded liability for such costs has been estimated at more than $50 billion.

GM and UAW had discussed how fully GM should be required to fund a special trust -- known as a voluntary employee beneficiary association, or VEBA -- in exchange for clearing that overhang from its balance sheet.

JP Morgan analyst Himanshu Patel said the financial structure of the health-care trust could be very complex.

"While we suspect the UAW itself will resist taking more than a token amount of equity contribution into the VEBA, we would not be surprised if the UAW is asking GM to issue new equity to the public as a way to raise cash to fund the VEBA," Patel said in a note Monday.

Bear Stearns analyst Peter Nesvold also said Monday it was unclear if GM has enough liquidity to fund a VEBA "without a meaningful capital raise."

Shares of GM closed up 3 percent Monday, extending a rally that has taken the stock up by 20 percent in a week on expectations for a cost-saving labor deal.

CSM's Robinet said GM was in no position to offer a job security guarantee as it restructures its loss-making North American operations.

"In a global automotive economy, it gets harder and harder to guarantee anything, especially over a three- to four-year period," he said.

(Additional reporting by David Bailey and Poornima Gupta)