GM and Union Kiss and Make Up

Well, that was quick. You'd almost be right to ask, "why bother?"

I'm talking about the strike by the United Auto Workers against General Motors (NYSE: GM  ) , which ended two days after it was called. Both sides swiftly reached an agreement on a new labor contract.

Not that you want strikers to be out of work for long, or the auto maker to have idle assembly lines, but if the disagreement that prompted the walkout could be settled so quickly, were both sides that far apart to begin with? Was there even a need to call a strike in the first place?

The union says it wanted job security. If GM wanted to save all this cash, the union insisted that it had to invest more in its U.S. plants and give workers some assurance that their jobs wouldn't be eliminated. While we're waiting for the details, preliminary reports suggest that the UAW got at least a partial victory.

It seems that the union and the automaker agreed to let the company buy out the higher-paid workers closer to retirement -- some making as much as $70 an hour -- while simultaneously agreeing to let newer, non-manufacturing jobs get paid less than the union wage. GM has committed to investing in its plants, something it probably would have done anyway.

Both sides also agreed on the creation of the health-care trust, largely be funded by GM, but run by the union. The voluntary employees beneficiary association (VEBA) will help the automaker take tens of billions in health-care costs off its books. This deal is similar to the one hammered out by Goodyear (NYSE: GT  ) and its striking workers last year.

Still, was there a need to strike? It seems hard to believe that GM caved in so quickly because of it. It had plenty of inventory still available to ride out an extended work stoppage. The VEBA was already on the table, and it's been well-publicized that the union wanted -- no, needed -- to get this done (as did the workers).

So with job security the only issue blocking settlement beforehand, it seems that the union needed to show its members it was still the tough-talking union of yesterday that could get into the dirt with the bosses. Yet what did it gain? It created a bifurcated wage system for older and newer workers, selling out the new hires to protect the old-timers. GM will be able to close the substantial wage gap between its workforce and overseas competition like Toyota (NYSE: TM  ) and Honda (NYSE: HMC  ) .

It ends up being a well-crafted deal for both sides, but one that could probably have been done without the showmanship of a strike. The UAW will now move on to talks with Ford (NYSE: F  ) and Chrysler. The issues are all pretty similar to those that were outstanding with GM, and they'll probably conclude without the theatrics we saw this time.

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