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General Motors Reaches Agreement With Workers to Lower Health Costs

By Danny Hakim


General Motors said Monday that it had reached a tentative agreement with the United Auto Workers union to cut $1 billion in annual health care benefits for more than 750,000 blue-collar workers, retirees and their families as part of an effort to climb out of a financial crisis.

“This is a very big step forward that we will build on,” said Rick Wagoner, GM’s chairman and chief executive. He called it “the single biggest cost reduction that we’ve probably been able to announce in a single day in the history of GM.”

Even as it disclosed the breakthrough with its union on Monday, GM reported a $1.6 billion third-quarter loss, its largest quarterly loss in more than a decade.

In a further reflection of its financial distress, the company, which has lost nearly $4 billion so far this year, said it would seek to sell a majority stake in the General Motors Acceptance Corp., the financial services giant that is GM’s most steady profit center.

The possible sale, along with the deal, encouraged investors on Wall Street. But for the union, the tentative agreement to cut health care benefits is the biggest strategy shift since the early 1980s, when the UAW made a wave of concessions to head off a bankruptcy filing by Chrysler.

This time, with the future of the entire domestic auto industry increasingly at risk, union leaders agreed late Sunday night, after several months of negotiations, to a deal broad enough to require the vote of GM workers for approval, after saying repeatedly that they would not reopen their labor contract before it expired in 2007.

Although the specifics of the agreement have not been disclosed, health policy experts said that in shifting more health care costs to workers and retirees, GM still appeared to be years behind big companies in most other industries.

And the benefits that GM’s retirees retain will probably still be the envy of many other retired Americans.

Retirees covered by union contracts in other industries pay a growing share of health care costs. At the big telecommunications companies, for example, retirees pay more, and companies like Verizon have added wireless units that do not have unions and have less-generous benefits.

Still, while the challenges of the American labor movement came into sharp relief earlier this year when some prominent unions split from the AFL-CIO, the retreat of the UAW sends a further signal about just how hard it has become for American labor unions to preserve previously won gains.

Among industrial unions, none has won richer contracts than the UAW, at least for Big Three assembly workers and retirees, many of whom pay no monthly premiums, deductibles or co-payments beyond those for prescription drugs.

That will change, though GM and the union declined to give details of specific cuts because local union leaders had not yet been informed of the agreement’s details.

GM shares rose $2.11, or 7.5 percent, to $30.09.