GM's deal paves way for Ford and Chrysler

DETROIT - GM's tentative contract with the United Auto Workers offers the other struggling U.S. automakers, Ford and Chrysler, enough cost-cutting inducements to find common ground and strike a deal with the union, analysts said yesterday.

"You can do some specific things for them and still work within the framework of this contract," said David Cole, chairman of the Center for Automotive Research in Ann Arbor. "I don't believe that the union would have negotiated that if they did not believe it was viable for Ford and Chrysler."

General Motors Corp. and the UAW agreed yesterday to a deal that would allow GM to move its unfunded retiree health-care costs into an independent trust administered by the UAW. The union also agreed to lower wages for some workers.

In exchange, the UAW won bonuses, an agreement from GM to hire thousands of temporary workers, and commitments to invest in U.S. plants, according to a person who was briefed on the contract.

The shift in retiree health care obligation into the UAW-run Voluntary Employees Beneficiary Association, or VEBA, is more important to GM than to its Detroit rivals, said Ross Eisenbrey, vice president of the Washington-based Economic Policy Institute.

He said the automaker carries roughly 31/2 retired workers for every active worker, while Ford Motor Co. has 11/2 retired workers for every active worker. Chrysler L.L.C.'s ratio is lower.

Of greater interest to Ford and Chrysler, he said, is the two-tiered wage structure, although both elements of the deal clearly serve the automakers' overall goal of cutting costs.

All three companies lost money last year, and their combined share of the U.S. market is down from 73 percent in 1996 to 54 percent last year.

"The union agreed to reduce the overall labor costs significantly, so that will be a help to both Ford and Chrysler," Eisenbrey said. "They'll want to get reductions that are in line" with the GM deal.

Ford spokeswoman Marcey Evans said Ford was pleased that GM and the UAW were able to tentatively agree, but would not comment on what it might mean for Ford.

Chrysler spokeswoman Michele Tinson said the company also was awaiting word from the UAW on when bargaining would begin.

"We look forward to working with the UAW on finalizing a responsible agreement that meets the needs of the company, our employees and the UAW," she said.

In exchange for their ratification, GM workers would get a one-time bonus of $3,000 and then annual bonuses, said a person briefed on the contract. That structure will be as attractive to Ford and Chrysler as it was to GM, because it is less costly than increasing base wage rates, said Greg Gardner, an analyst with Harbour Consulting in Troy, Mich.

"Given the conditions . . . I'm sure they'll push for certain customized elements," he said. "But the fact that there is an agreement with GM is definitely a very positive development for all three companies."