This case is about the collective bargaining agreement between one of the world's leading automobile manufacturers, General Motors Corporation (GM), and the United Auto Workers in late 2007. The agreement, which a number of experts have termed as 'historic', was the result of a very complex bargaining process.



GM, which dominated the US market till 1980, with a market share of 46 percent, saw its market share decline steadily after the entry of Japanese competitors. In addition to issues relating to its products and marketing, GM's fortunes were severely affected with under-funded pension liabilities, rising employee and retiree healthcare costs, and a decreasing market share in the US automobile market.





The company's US market share fell to less than 25 percent in 2006. In 2007, GM inked a new labor contract with UAW which, analysts felt, would change the competitive landscape of the US auto industry and go a long way in ensuring GM's survival. Analysts felt that the deal also showed the changing role of the labor union in the 21st century.



On November 12, 2007, an agreement was signed between General Motors Corporation (GM), the world's second largest automobile manufacturer5, and United Auto Workers6 (UAW) for providing healthcare benefits to workers.



The agreement was reached after a strike by the workers of GM followed by a collective bargaining process. The prime objective of the contract was to reduce the company's healthcare costs by forming a Voluntary Employees' Benefit Association7 (VEBA) fund. Under the agreement, the UAW was entrusted with the responsibility of administering the healthcare benefits of workers.



The agreement with the UAW put an end to the problems GM had been facing with regard to the rising healthcare costs for its employees.



GM had been the market leader in the US till 1980, with a market share of 46 percent. However, with the entry of foreign car manufacturers like Honda Motor Company8 (Honda) and Toyota Motor Corporation9 (Toyota), GM began to face intense competition and it lost market share to these new players. Analysts felt that GM had lost its market leadership position because of its sluggishness in designing new models when compared to its Japanese competitors who kept coming out with new designs.





In addition to this, GM's fortunes were severely affected with under-funded pension liabilities, rising employee and retiree healthcare costs, and a decreasing market share in the US automobile market.



Thanks & Regards,

Magesh Kumar. S