The United Auto Workers' president warned the union is not in a concessionary mode as contract talks got underway Monday with General Motors Corp., the largest vehicle manufacturer in the United States.

UAW President Ron Gettelfinger, front left, shakes hands with GM chairman and CEO Rick Wagoner in Detroit on Monday in a traditional rite as contract talks begin.
(John F. Martin/Associated Press)

After the traditional handshake ceremony in Detroit, UAW President Ron Gettelfinger said a strike still is possible despite the companies' troubled financial positions.

"That's always an option that we have," he said.

Earlier, Gettelfinger smiled and shook hands with GM chairman and CEO Rick Wagoner, while GM chief negotiator Diana Tremblay shook hands with UAW vice-president Cal Rapson. All four had to lean across a table to complete the handshake for photographers.

The UAW-Ford handshake ceremony was scheduled for Monday afternoon in Dearborn. The union formally opened negotiations with Chrysler Group on Friday, and the national contracts with all three expire Sept. 14.

Talks are different this time because the three domestic automakers lost a combined $15 billion US in 2006 and are in the midst of shrinking themselves and rolling out new vehicles in an effort to better compete with the Japanese. Industry analysts have said reducing labour costs is critical to the companies' survival.

Ford is in the worst shape of the three, having mortgaged its factories in order to set up a $23.4 billion US line of credit to cover losses and pay operating expenses while it restructures. Ford lost $12.6 billion US last year and $282 million US in the first quarter of this year, and it doesn't expect to make money again until 2009.

Analysts say Ford likely will seek deeper concessions than the other two automakers, perhaps temporary wage cuts.

All three say the talks need to bring them labour cost parity with Japanese automakers, who make about $2,000 US per car more in profits.

The Detroit automakers say their hourly labour costs are about $25 US more than Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co. when health care, pension, retiree and other costs are factored in.

The Detroit automakers all have the same problems, said Laurie Harbour-Felax, managing director at Stout Risius Ross Inc., who has done detailed studies of auto manufacturing costs.

"Ford is probably not as well-positioned as GM today … but they still have the same issues around health care that are crippling them," Harbour-Felax said.

All three must deal with rising health care costs and the "jobs bank," in which companies pay workers most of their salaries when their assembly lines aren't running. She said her studies have shown that the Detroit Three pay $1,200 to $1,500 per car in health care costs, far more than the Japanese automakers.

The UAW, however, has said that labour costs represent only 10 per cent of the price of a new vehicle.

Clearly health care is a major issue for GM, which paid $4.8 billion for it last year and has said it is the company's largest competitive disadvantage.

"I think it's impossible to ignore the issue," Tremblay said after the handshake. "We'll see how possible it is to address it."

Harbour-Felax said she agrees with the union that companies must do more to cut costs and become more efficient. All three automakers have said they are moving toward leaner manufacturing and engineering techniques and use of the same architecture globally on multiple models to save money.