2007 General Motors strike

The UAW were engaged in talks with General Motors (GM) to negotiate a new labor contract but were unable to come to an agreement before the deadline.

After the two day strike, the two parties reached an agreement in which the UAW union would assume the responsibility for managing retiree healthcare liabilities.

While many of the foreign manufacturers pay less in wages as most of their plants are not a part of a union,[2] GM's labor contracts increase its costs per car by an estimated $2000 impacting its competitiveness.

Doing so what entail a large initial payment from GM but would allow it to remove workers healthcare benefits as a liability on its balance sheet.

[4] Immediately after the deadline had passed, the UAW union moved to a national strike that involved 73,000 workers walking out of an estimated 80 GM facilities.

In the UAW's press conference, its president Ron Gettelfinger expressed his disappointment in GM's management and their refusal to meet the union halfway.

Gettelfinger also expressed that the UAW was willing to consider GM's request to form a trust to take on healthcare liabilities, and that job security remained the union's number one concern.

In fact, he expected that the company would not experience issues related to inventory shortages for two to three weeks should the strike continue as a result of no agreement being reached.

At the time, GM's inventory levels were generally higher than that of their competitors, a point that many linked to the company's poor sales in recent months leading up to the strike.

Specifics of the deal were not made available, however the headline for GM was that the UAW had agreed to the establishment of a VEBA that would assume the retiree healthcare liabilities worth $51 billion.

[4] It was reported that members who had information regarding the details of the VEBA disclosed that the trust would be funded by a combination of various assets including cash and GM stock.

Many experts pointed out the possibility that both Ford and Chrysler could establish similar VEBA trusts which would reduce liabilities, something that many of these companies have looked forward to.

The stock price of Ford increased by more than 6% in the same session, likely linked to investor expectations that a similar deal would be reached in their negotiations with the UAW.

GM pointed out their healthcare spending in the previous year totaled $4.8 billion, an amount that could have been spent towards launching six vehicle models or building an additional four manufacturing plants.

Wall street analysts were expecting GM to benefit from increased healthcare cost savings amounting to $3 billion annually as a consequence of the newly established VEBA trust.