Oracle of Delphi

GM proposes 401(k)-styled pensions for new hires

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Reuters

September 19, 2007 - 5:40 am EST

UPDATED: 9/19/07 10:11 p.m. EDT

DETROIT (Reuters) - General Motors for the first time is proposing a 401(k)-style retirement plan for new UAW hires instead of traditional pensions, Bloomberg News reported today on its Web site, citing people with knowledge of the talks.

GM also has proposed freezing cost-of-living raises to help pay for a union-run fund that would take responsibility for retiree health care, the report said.

Meanwhile, GM and the UAW recessed their contract negotiations this evening after another full day of talks. It was the fifth day of bargaining since the previous four-year agreement expired at day's end Friday.

The parties gave no update of the talks, as has been their practice. They resume negotiations Thursday morning.

Moving to a 401(k) kind of pension program would make sense if GM and the UAW agree to a new two-tier wage system for new hires.

But like any contract negotiation, all proposals remain subject to more negotiation - and ultimately must be ratified by the rank-and-file workers. Neither the UAW nor GM has officially commented on specific bargaining issues.

Bloomberg said union workers are guaranteed a set yearly payout, which is $36,000 for current GM retirees. A 401(k) plan, also known as a defined contribution plan, typically allows employees to match a portion of company payments and control their own long-term pension investments. Retirement pay is then determined by the amount of contributions and the investment performance of the fund.

Many employers are moving toward such plans. Bloomberg, citing Pension Benefit Guaranty Corp. statistics, said that from 1986 to 2004, 101,000 single-employer plans in the U.S. ended their defined-benefit programs. By 2004, only 30,000 defined-benefit pension plans existed, down 73 percent from 112,000 plans in 1986, Bloomberg said.

After breaking off talks at around 9 p.m on Tuesday, GM and UAW negotiators returned to the bargaining table on Wednesday morning.

Since Monday, bargaining has shifted into a deliberative and slower-moving phase as both sides stepped away from the kind of round-the-clock sessions that the automakers and the union have used in the past to hasten a deal.

UAW President Ron Gettelfinger and Vice President Cal Rapson, who are leading the union negotiations with GM, have cautioned that the union would set a firm deadline for talks to conclude if progress stalls. GM employees, meantime, continue to report to work as usual.

David Barkholz contributed to this report

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$36k / year is a sweet deal as guaranteed retirement income. No wonder the UAW membership continues to line up with their hands out. Unfortunately for them, those days are over. I continue to be pessimisic about the outcome of the negotiations. I wonder if yet another contract term of Toyota drubbing won't be required to enlighten these buffoons.

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