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UAW grants concessions, exec warns of depression

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Photo by AP Photo/Donna McWilliam

General Motors employee Rodney Kirkland holds a sign along with other demonstrates outside U.S. Sen. John Cornyn's, R-Texas, office in Dallas, Wednesday, Dec. 3, 2008.

DETROIT — Worried about their jobs and warned that the cost of bankruptcy could be a widespread depression, hundreds of leaders of the United Auto Workers voted overwhelmingly Wednesday to make concessions to struggling U.S. automakers, including all but ending a much-derided program that let laid-off workers collect up to 95 percent of their salaries.

"Everybody has to give a little bit," said Rich Bennett, an official for Local 122 in Twinsburg, Ohio, representing Chrysler workers. "We've made concessions. We really feel we're doing our part."

Union leaders also agreed to let the cash-starved automakers delay billions of dollars in payments to a union-administered trust set to take over health care for blue-collar retirees starting in 2010.

In addition, they decided to let the Detroit leadership begin renegotiating elements of landmark contracts signed with the automakers last year, a move that could lead to wage concessions.

The vote came on the eve of congressional hearings on as much as $34 billion in loans that General Motors and Chrysler say are critical to their survival. Ford has said it may be able to hang on through 2009 without additional credit.

Democratic congressional leaders say they want to act to prevent one or more of the automakers from collapsing, but they have made no commitments to approve an unpopular bailout at a time of economic peril.

Senate Majority Leader Harry Reid said a Democratic plan to tap the Wall Street rescue fund to save U.S. automakers does not have the votes to pass.

UAW President Ron Gettelfinger said the union must help persuade Congress to offer the loans or risk destroying what he said is the country's economic spine.

"Let's look at the backbone and the millions of jobs lost if we lost this industry," he said.

Earlier in the day, Chrysler Vice Chairman Jim Press went a step further, warning of a depression if even one automaker runs out of cash.

"We're on the brink with the U.S. auto manufacturing industry," Press told The Associated Press in an interview. "If we have a catastrophic failure of one of these car companies, in this tender environment for the economy, it's a huge blow. It could trigger a depression."

Both Chrysler LLC and General Motors Corp. are so perilously low on cash that the companies may not be able to pay all their bills by the end of the year. GM wants a total of $18 billion in loans. Chrysler is seeking $7 billion, and both manufacturers say they need cash this month.

Ford Motor Co., which borrowed billions before credit markets tightened, says it can survive through 2009 and may not need to tap the $9 billion credit line it requested.

As a further sign of the companies' dire straits, Moody's Investors Service on Wednesday downgraded its ratings for GM and Chrysler, sending them further into non-investment, or "junk," status. Moody's affirmed its ratings for Ford, but said the outlook for the three automakers is "negative," implying further downgrades are possible.

Sent home empty-handed last month, executives from all three companies knocked on doors on Capitol Hill and made television appearances Wednesday, hoping the detailed plans they submitted Tuesday would convince hostile lawmakers to help. CEOs from all three, plus Gettelfinger, will appear before Senate and House committees Thursday and Friday.

Fritz Henderson, GM's president and chief operating officer, stressed on NBC's "Today" show that bankruptcy isn't a viable option.

Choosing bankruptcy, he said, would further erode consumer confidence in the automaker and "we want them to be confident in their ability to buy our cars and trucks."

All three executives took hybrid cars from Detroit to Washington after enduring harsh criticism last month for using corporate jets for the trip.

The automakers' plans were being scrutinized by legislators, the White House and the Treasury and Commerce departments.

"It sounds to me like the companies have given this a lot of thought and are willing to make some tough decisions," White House press secretary Dana Perino said. "We just need a little more time to pore through the documents."

President-elect Barack Obama said it appeared that the CEOs were returning to Congress with a "more serious set of plans" for how their companies are going to survive.

The plans painted the most dire portrait yet of the industry's woes — including the prospect of shuttered factories and massive job losses if Congress does not act quickly.

The much-derided "jobs bank" that permits laid-off workers to receive most of their pay was created in the mid-1980s as a trade-off to the UAW for increased factory automation. But the system became a symbol for the union's largess when workers were paid for years after their factories closed.

Gettelfinger said the union will suspend the bank, but he did not give specifics or a timetable.

"We're going to sit down and work out the mechanics," Gettelfinger said. "We're a little unclear on some of the issues."

Members of Congress criticized the automakers last month for paying laid-off workers, saying it's one reason why their labor costs are higher than competitors. About 3,500 workers from all three companies are now in the jobs bank.

Until the 2007 contract, workers could stay in the jobs bank indefinitely, but the new pact imposes time limits. Workers in the bank must report to local union halls. Sometimes they do charity work, but other times they do nothing.

Gettelfinger stopped short of saying the union would reopen its contracts but said it would return to the bargaining table to change some terms. Modifications would have to be ratified by members.

Delaying the health care trust payments will help the companies survive their cash shortages, which they say were brought on by the severe economic downturn and the worst U.S. sales in more than a quarter century.

The delay will have to be approved by federal courts, which already have blessed the trusts' formation.

Democratic House Speaker Nancy Pelosi has said she hopes Congress acts to help the automakers. Reid said he would advance a bill Monday in preparation for a possible auto bailout vote later in the week.

The automakers, humbled by criticism from their last visit, gave lengthy plans with minute details about how they plan to repay the government money.

Ford CEO Alan Mulally and GM CEO Rick Wagoner both said they would work for $1 a year if their firms took any government loan money. Chrysler chief Robert Nardelli already works for $1 a year.

Per the UAW's constitution, Gettelfinger receives an annual salary of about $145,000 per year, plus insurance, retirement and other benefits.

Ford offered to cancel management bonuses and salaried employees' merit raises next year, and GM said it would slash top executives' pay. Ford and GM both said they would sell their corporate aircraft.

Nevertheless, Sen. Arlen Specter, a Pennsylvania Republican, said the mood in Congress "is not supportive" of the automakers, although he called the consequences of just one of them failing "cataclysmic."

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Associated Press writers Ken Thomas, Julie Hirschfeld Davis and Jennifer Loven in Washington, and AP Business Writer Deborah Yao in Philadelphia contributed to this report.