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ECONOMICS REPORT - GM Sees Faster Drive Without Weight of Retiree Health Costs

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This is the VOA Special English Economics Report.

Labor relations in the American auto industry took a new turn this week with a deal that many are calling historic.

An employee returns to work at the General Motors factory in Warren, Michigan
An employee returns to work at the General Motors factory in Warren, Michigan

General Motors and the United Auto Workers agreed on a proposed new contract after a strike that lasted two days. Seventy-three thousand union workers walked off the job.

Job security was the top issue for union members. The U.A.W. is seeking to protect jobs in the United States and limit the number of temporary workers used by General Motors.

For G.M., the main issue was to find a way to cut its costs for health care for retired workers. The nation's largest automaker estimates its long-term responsibilities at more than fifty billion dollars.

Under the agreement, G.M. would create a trust called a volunteer employee benefit association. This VEBA would pay health care costs for retirees. G.M. is expected to invest about thirty-five billion dollars to start the fund. The fund would be independently administered and the union would supervise it.

United Auto Workers President Ron Gettelfinger said the fund should secure benefits for retirees for the next eighty years.

G.M. has seen its share of the North American market shrink while its labor costs have remained far above its biggest competitor, Toyota. The deal would give G.M. the right to lower pay for some new employees.

The agreement is likely to provide an example for coming talks with the two other major American automakers, Ford and Chrysler.

The new contract still needs final approval by the union. Until then the full details are not being released. The union expects its members to begin voting this weekend.

The trust would also need approval by the courts and the Securities and Exchange Commission. The process is expected to take two years. After that, G.M. would no longer have to pay for health benefits for its retirees.

Chief Executive Rick Wagoner said the agreement will help his company become more competitive. This, he says, will permit G.M. to keep a strong manufacturing presence in the United States and make future investments.

This was the first nationwide strike against G.M. since nineteen seventy.

The existing contract ended at midnight on September fourteenth. Union members continued working until their leaders called the strike Monday morning. The strike ended early Wednesday after negotiators reached the agreement.

And that's the VOA Special English Economics Report, written by Mario Ritter. I'm Bob Doughty.

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