UAW assumes retiree-benefits burden for GM workers

U.S. deal could cost Canada its competitive advantage

After a two-day strike by United Auto Workers members at General Motors in the United States, the union and the company reached a deal to shift the burden of retiree health-care benefits to the union.

The deal will relieve GM of its $51-billion US obligation for retiree health-care benefits. Instead, the company will make a one-time, $36-billion US investment into a Voluntary Employees Beneficiary Association (VEBA) trust, which the union will manage.

This is expected to save the company $18 US to $19 US an hour in labour costs, with the average hourly U.S. labour costs falling to $55 US (includes pay and benefits), close to the estimated $48 US that Japan-based auto makers pay their U.S. workers.

In all, the move is expected to save the company about $3 billion a year.

The new four-year deal with GM also includes annual bonus payments instead of wage increases, a lower hourly pay rate for some newly hired employees and commitments by GM to invest in its U.S. operations.

Ford and Chrysler have smaller retiree-to-active-employee ratios than GM (2 to 1 and 1 to 1 compared to 4 to 1), so if Ford and Chrysler off-load their retiree benefits to the union, as is expected once they begin talks later this year, the cost savings for those automakers won't be as significant.

However, the move could make Canada, which has relied on cost benefit of its universal health care to attract U.S. investment, less attractive for the automakers.

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