Friday, September 21, 2007

GM Proposes Radical Pension Changes

General Motors is pushing for a radical move away from its defined benefit pension plan in negotiations with the United Auto Workers union. New hires would no longer receive traditional pensions but would be set up with individual 401(k)-style retirement plans, say sources close to negotiations.

GM's push toward individual investments instead of a guaranteed monthly check means the biggest U.S. automaker wants to scale back three landmark gains by the UAW in the past half- century: a fixed pension, company-paid health care and an annual cost-of-living raise.

The negotiations give Chief Executive Officer Rick Wagoner a chance to shed tradition and ensure GM's survival before the next contract expires in 2011. Since the current accord was created in 2003, GM has announced plans to shut 12 North American locations and eliminated more than 34,000 workers while losing $12.4 billion over 2005 and 2006.

``They know the old ways don't work -- they're not competitive,'' said Pete Hastings, a fixed-income analyst at Morgan Keegan & Co. in Memphis, Tennessee. ``They modernize their factories, and they have to modernize their pay scale.''

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, said the people, who asked not to be identified because they aren't authorized to speak publicly.

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