Investors greeted General Motors Corp. ‘s (GM) tentative agreement with the United Auto Workers union with optimism Wednesday, driving shares up considerably in pre-market trading, after the company insisted the “agreement helps us close the fundamental competitive gaps that exist in our business.”
“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, ” GM Chief Executive Rick Wagoner said in a press release. The executive has been pushing for health-care cost cuts over the entire second half of the decade, and the VEBA may help him more quickly achieve his goal of cutting structural costs to 25% of total revenue. John D. Stoll, Money.cnn.com
The four-year accord may transform the competitive landscape for the U.S. auto industry, allowing the Detroit automaker to operate with a cost structure closer to that of its Japanese rivals. Should the deal be approved by GM workers, Ford Motor Co. and Chrysler LLC will seek similar cost-cutting UAW contracts. GM rose as much as 7.4 percent. Jeff Green and John Lippert, Bloomberg.com
Details of the proposed contract were sketchy, but GM and the UAW confirmed that it would create a trust fund financed by GM and run by the union that would administer healthcare benefits for retired GM workers.
GM’s primary goal in the talks was to erase a $25-an-hour disparity in labor costs between the Detroit automakers and Japanese companies such as Toyota Motor Corp., which have non-union workers at U.S. plants. Martin Zimmerman, latimes.com
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