[R-G] Bailout Pact of GM, U.S. Would Block a UAW Strike

[Yoshie Furuhashi]

<http://online.wsj.com/article/SB123144334321865211.html?mod=googlenews_wsj>
JANUARY 8, 2009, 8:23 P.M. ET
Bailout Pact Of GM, U.S. Would Block A UAW Strike
By JOHN D. STOLL and SHARON TERLEP

DETROIT -- The bailout agreement between General Motors Corp. and the
federal government includes terms aimed at blocking the United Auto
Workers from going on strike while the union negotiates wage and
benefit cuts with the auto maker over the next few weeks.

The terms are part of the agreement GM and the U.S. Treasury
Department hammered out in December. They surfaced late Wednesday in a
regulatory filing by GM and surprised union leaders, including
President Ron Gettelfinger, people familiar with the matter said.

Treasury spokeswoman Brookly McLaughlin said that the no-strike
provision was "included as a taxpayer protection" and that it could be
waived if the government determines that was appropriate.

The chances of a UAW strike are small because both sides are under
orders from the government to work quickly to cut costs to help GM get
on the path to recovery.

Any delay could push the auto maker to the brink of bankruptcy again,
a fate that was put off for now after the government provided the
first $4 billion portion of a $13.4 billion emergency loan.

The company and the union have until Feb. 17 to negotiate cuts. If
they do, GM could be in line for additional loans.

Still, the strike ban is likely to give GM some additional leverage as
it negotiates with its largest U.S. union. In the loan agreement, the
Treasury stipulated that there can be no labor strikes against GM
pending or threatened between the period from Dec. 31 to Feb. 17.

GM outlined details of the loan in a filing with the Securities and
Exchange Commission Wednesday evening.

Chrysler LLC has a similar no-strike provision in its loan contract. A
Chrysler spokeswoman declined to comment.

GM and the UAW are set to start negotiating Monday on issues ranging
from job security to compensation. When the White House gave GM and
Chrysler a $17.4 billion bailout last month, it insisted that the UAW
make concessions that would allow the auto makers to become more
competitive with foreign rivals like Toyota Motor Corp.

During a joint interview on NBC Thursday morning, GM Chief Executive
Rick Wagoner and the UAW's Mr. Gettelfinger expressed optimism about
their ability to come to an agreement that puts the auto maker on a
stronger footing and meets the government's demands.

"I am confident that we'll come together and get the kind of changes
that we need," Mr. Wagoner said. He added that GM won't have to cut
retiree benefits further.

Mr. Wagoner, under intensifying pressure to restructure the
100-year-old auto maker, also needs to reach a deal with public debt
holders by Feb. 17 that will lead to GM cutting its $60 billion debt
load by about two-thirds. In order to succeed, he will have to get the
UAW to restructure a recent health-care agreement.

"We will be in immediate default of the loan if they were to strike,"
GM spokesman Tony Sapienza said on Thursday. "It would not be in [our]
best interest." If GM can't prove it can be viable going forward by
March 31, it may be forced to pay back the loans from the government
immediately.

A UAW spokeswoman declined to comment.

Barring the UAW from a strike has taken a critical bargaining chip
away from the union. In years past, when negotiating with the Big
Three and key automotive suppliers, the UAW has often encouraged
workers to walk off the job, leading to major cost penalties and a
lack of vehicle supply for the auto makers.

On Monday, as bargainers from GM and the UAW begin hashing out
concessions, some UAW members -- under the banner of a group called
autoworkercaravan.org -- are planning to protest the proposed cuts by
rallying at the Detroit auto show.

"Cutting wages will not help the industry at this point," said Tiffany
Ten Eyck, a spokeswoman for the group. "We are in favor of a
longer-term solution," including deeper executive pay cuts and more
energy-efficient production.

Workers represented by the UAW have walked off GM assembly lines
several times over the past 15 months as part of labor disputes.

The union also staged a costly strike against one of GM's top
suppliers, American Axle & Manufacturing, in 2008. That action,
combined with smaller strikes at GM assembly plants in Michigan and
Kansas, cost the auto maker billions of dollars in cash at a time when
it was already struggling to stay afloat.

At this point, however, with U.S. light-vehicle demand tracking at its
lowest point in decades and GM perilously close to collapse, the UAW
might well have been reluctant to strike in any case.

"You're literally signing your own death warrant," KeyBanc auto
analyst Brett Hoselton said, referring to the likelihood that a
prolonged UAW strike could further dent GM's prospects.

He also said the UAW is not just negotiating with GM but also with the
White House, so its relative bargaining power has diminished compared
with past labor talks.

"In that sense, with that third party player involved, a strike is
effectively a threat against the U.S. government," he said.

-- Kris Maher and Alex P. Kellogg contributed to this article.

Write to John D. Stoll at john.stoll at wsj.com and Sharon Terlep at
sharon.terlep at dowjones.com