General Motors : Coming Confrontation?

Wagoner appears even less likely to start a fight to completely rewrite the union's health-care plan. The union's opposition could soften if GM's fortunes slip dramatically in the next year. But the UAW has almost never agreed to a huge giveback in the middle of a contract. (It did so in 1980, when the federal government demanded concessions as part of its Chrysler bailout, and again for Ford and GM in 1981, when spiking gas prices and a recession slammed sales.) Says Sean P. McAlinden, economist at CAR: "Why would union workers on the verge of retirement agree to cut retirement benefits?" GM's Kowaleski responds that there may be ways to get what GM wants while giving the union something in return: "Do not underestimate the breadth of scheming that can go on to come up with a win-win for everybody."There might be loopholes Wagoner could exploit. Read one way, the labor contract does not guarantee benefits to retirees -- who account for two-thirds of GM's health-care costs -- and only covers active workers, says Sanford C. Bernstein's Johnson. But one GM insider says that interpreting the contract that way would spark a "nuclear war." The UAW could find any number of ways to strike key supply factories and gum up the company. Wagoner knows that firsthand. While president of GM North America in 1998, he played hardball with the UAW over a dispute involving two union locals in Flint, Mich. Those workers, who made parts needed by every GM assembly plant, struck for 54 days over what they said were local issues. That shut down the entire company, costing it $2 billion and nine percentage points of market share, though GM recovered all but a point of that by yearend.Labor experts believe Wagoner is raising a hue and cry now to position the company for bigger concessions when contract talks open. "If you want to get the union to cut medical benefits in September, 2007, you don't start in August. You start now," says Harley Shaiken, a labor professor at the University of California at Berkeley. But if the sales picture deteriorates over the next year, GM probably will have little choice but to force a confrontation sooner and radically reshape its cost structure.