U.S. auto workers' union ratifies GM labor deal

The United Auto Workers (UAW) union ratified a labor deal with General Motors Corp. on Friday, which will help the largest U.S. automaker to emerge more quickly from a possible bankruptcy.

The contract was approved with an overwhelming 74-percent vote by its members, the UAW said after a conference at its Detroit headquarters on Friday afternoon.

Under the deal, a health-care trust for union retirees, known as a Voluntary Employee Beneficiary Association (VEBA), will get a 17.5-percent stake in a reorganized GM and the right to buy an additional 2.5-percent stake.

VEBA will receive 6.5 billion U.S. dollars in preferred stock that pays a nine-percent dividend, and another 2.5 billion dollars to be repaid in installments until 2017. Meanwhile, GM is able to pay less in cash it owed VEBA.

UAW President Ron Gettelfinger said the GM talks were " difficult and challenging" and the concessions union has made was "drastic." "We are satisfied we've done the right thing," Gettelfinger told the press.

The new labor agreement will "enable the company to eliminate the wage and benefit gap with its competitors," GM said in a statement. It confirms that the amended agreement covers approximately 54,000 hourly employees located in 46 U.S. facilities.

The long-accumulating retiree health-care costs have made GM much less competitive to its foreign competitors. In 2008, after topping world sales for 77 consecutive years, GM lost the title to Japanese automaker Toyota.

Another highlight is that the UAW won guarantees of a plan, which GM announced earlier on Friday, that the company will utilize an idled assembly and stamping facility for future production of a compact/small car in the United States.

Also, GM agreed to resume production at four closed plants once auto sales, currently hovering at 27-year lows, bounce back.

The ratification will help smooth GM's path through bankruptcy which seems inevitable. GM's employees represented by the Canadian Auto Workers already approved a cost-saving contract on May 25.

GM, the largest U.S. industrial corporation and once the largest automaker in the world, has been struggling to stay afloat in the past seven months despite an injection of 19.4 billion U.S. dollars from U.S. Treasury. The company is expected to file for bankruptcy protection on June 1.

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