Auto Workers’ Contract Agreement Would Shift Retiree Health Costs
In a predawn announcement Wednesday, United Auto Workers President Ron Gettelfinger said the union has reached a tentative contract deal with General Motors that includes the creation of a voluntary employees' beneficiary association and ends UAW's two-day strike, the Detroit Free Press reports. Gettelfinger said workers would return to their jobs on Wednesday (Merx et al., Detroit Free Press, 9/26).
The VEBA will shift more than $50 billion in GM retiree health care obligations to the union.
Ford Motor and GM in August formally asked UAW to assume responsibility for the health care benefits of more than 1.5 million working and retired employees. The companies would transfer retiree health care obligations to the VEBA, an independent trust fund that the union would manage.
A key dispute in the VEBA negotiations had been a gap of billions of dollars between the automaker's proposed funding level and the union's desired amount (California Healthline, 9/25).
People close to the negotiations have said the VEBA likely will be funded at about 70% to 75% of GM retiree health care liabilities. At 70%, the fund would be in excess of $35 billion, the Wall Street Journal reports.
One person familiar with the talks told the Journal that GM and UAW might differ in their statements about VEBA funding levels because of the complexities of the fund and the different formulas for calculating retiree health care obligations (McCracken/Stoll, Wall Street Journal, 9/26).
Creation of the VEBA is expected to reduce the labor cost gap between Detroit automakers and their foreign rivals by about half, according to the Free Press (Merx/Higgins, Detroit Free Press, 9/26).
Gettelfinger said that projections show the VEBA will be solvent for at least 80 years. In addition, he said UAW will not manage the fund directly (Merx et al., Detroit Free Press, 9/26).
"The union is not going to manage the fund. We're going to have a trust that manages that fund," Gettelfinger said, adding, "I was very comfortable with that" (Higgins, Detroit Free Press, 9/26).
Retirees likely will see an increase in health care contributions, but it will be offset by a raise in their pensions, a person familiar with the talks said (Krisher/Durbin, AP/Philadelphia Inquirer, 9/26).
Gettelfinger said, "I'm pleased to say we have a VEBA in place that will secure the benefits of our retirees and every seniority employee who is on the roles as of Sept. 14, and that stretches out in our projections for the next 80 years," adding, "I think our retirees will be exceptionally pleased with this contract" (Merx et al., Detroit Free Press, 9/26).
Now that UAW and GM negotiators have come to an agreement, the union must "sell the contract to members who lost pay while on strike and are leery of giving up company-guaranteed retiree health care benefits," the Chicago Tribune reports.
A group of UAW activists has been voicing opposition to the creation of a VEBA, saying that members are giving up benefits that took decades to win (Popely, Chicago Tribune, 9/26).
UAW leaders will be briefed on the deal on Thursday and Friday (AP/Philadelphia Inquirer, 9/26). The vote to ratify the contract could take place as early as this weekend, according to the Tribune.
If the contract is approved by UAW members, it could take several months to implement the VEBA because it requires approval by the Securities and Exchange Commission (Chicago Tribune, 9/26).
With the GM negotiations concluded, UAW will turn its attention to contract discussions with Ford and Chrysler, which largely were put on hold after GM was announced the lead negotiator.
Gettelfinger said the union is going to attempt to finish the contract negotiations simultaneously. "There is no reason ... that at this point in time why we can't get both of those done at the same time," Gettelfinger said. He also said that negotiators "expect this will basically be the same agreement" (Higgins, Detroit Free Press, 9/26).
Several broadcast programs reported on the health care-related provisions of the agreement. Summaries appear below.
- American Public Media's "Marketplace Morning Report": The segment includes a discussion with GM spokesperson Tom Wickham about the health care trust and other issues (Napoli, "Marketplace Morning Report," American Public Media, 9/26). Audio and a transcript of the segment are available online.
- NPR's "All Things Considered": The segment includes a discussion with consultant Lance Wallach about the trust and other issues (Siegel, "All Things Considered," NPR, 9/25). Audio of the segment is available online.
- NPR's "Morning Edition": The segment includes a discussion with NPR correspondent Frank Langfitt, who has been covering the negotiations, about the trust and other issues (Montagne, "Morning Edition," NPR, 9/26). Audio of the segment is available online.
- NPR's "Talk of the Nation": The segment includes a discussion with Micheline Maynard, Detroit bureau chief for the New York Times, about health care and other issues (Brooks, "Talk of the Nation," NPR, 9/25). Audio of the segment is available online.
- Washingtonpost.com: Steven Pearlstein, a business columnist for the Washington Post, is scheduled to discuss the agreement in a washingtonpost.com online chat on Wednesday at 11 a.m. ET (Washingtonpost.com, 9/26). Questions can be submitted online during the chat. A transcript will be available online after the chat.