Auto Parts Maker, Union Reach Deal on Health Care Costs
Automotive part manufacturer Dana announced on Friday it has reached a four-year agreement with United Auto Workers and United Steelworkers to transfer retiree health care and long-term disability liabilities to two health care trust funds, generally known as voluntary employer benefit associations, the New York Times reports (Maynard, New York Times, 7/7).
Dana filed for Chapter 11 bankruptcy protection in March 2006.
The trust fund is expected to save Dana more than $100 million annually, according to the company (Seewer, AP/Wilmington News Journal, 7/6). Dana will contribute about $700 million in cash to the fund and an additional $80 million in stock after the company reorganizes.
The agreement gives "a glimpse of the kind of steps the UAW is willing to consider, at least in the case of companies in dire straits," which could affect contract negotiations that start July 23 with the Big Three auto manufacturers, according to the Times.
However, UAW leaders "have maintained that the deals reached at bankrupt companies should not be viewed as a road map of what might happen in the talks" in July, the Times reports (New York Times, 7/7).
Dana will present the plan in U.S. Bankruptcy Court on July 25. Dana's United Steelworkers' employees are scheduled to vote on the fund on July 20. UAW did not say when its Dana employees would vote (Ramsey, Bloomberg/Washington Post, 7/7).
The Los Angeles Times on Monday examined how "reducing health care costs is expected to be the driving issue for" General Motors, Ford Motor and Chrysler during contract negotiations in July.
As of the end of 2006, the three automakers combined had around $90 billion in underfunded retiree health obligations, which the companies say need to be reduced in order to stay competitive with Asian auto manufacturers.
GM spokesperson Dan Flores said the difference between U.S. and Japanese automakers' health costs is a "significant competitive gap." Flores added, "Based on the magnitude of the cost, health care will continue to be a discussion point for GM and the UAW."
However, the extent of concessions UAW will be willing to grant the automakers "is unclear," according to the Times (Zimmerman/Huffstutter, Los Angeles Times, 7/9).