UAW's Contract Discussions Under Way With Big Three Automakers

Main Category: Health Insurance / Medical Insurance
Article Date: 25 Jul 2007 - 20:00 PDT

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Four newspapers recently examined contract negotiations between the United Auto Workers and U.S. automakers on possible solutions to fund retiree health care. General Motors, Ford Motor and Chrysler cover the health expenses of more than 1.1 million current and former union members and their dependents, at a cost of about $12 billion annually. About 600,000 of those members are retirees.

In recent months, the automakers have been weighing an agreement reached late last year between Goodyear Tire & Rubber and the United Steelworkers of America. Under the agreement, Goodyear transferred retiree health care obligations to an independent trust fund known as a voluntary employee beneficiary association, to be managed by the union. In exchange, Goodyear established a $1 billion fund to pay health care costs and agreed to invest at least $550 million in manufacturing facilities represented by the union. The VEBA solution could cost the automakers between $60 billion to $65 billion in upfront costs. Chrysler began talks on Friday, while Ford and GM will begin Monday. The current UAW contract expires Sept. 14 (Kaiser Daily Health Policy Report, 7/20). Summaries of recent coverage appear below.

• Bloomberg/Baltimore Sun: UAW is "under intense pressure" as its "active membership is shrinking because its employers, the Big Three, are losing market share," according to John Casesa, managing partner of Casesa Strategic Advisors. The Big Three's combined U.S. market share has declined to just over 50%. UAW membership is at about a third of its peak of 1.5 million in 1979 (Bloomberg/Baltimore Sun, 7/21).
  
  
• Detroit Free Press: "Health care isn't the only issue" that will be discussed in meetings beginning Monday between UAW and GM, but many observers and participants say it is "the topic on which the negotiation on other GM-UAW issues will hinge," according to the Free Press. Sean McAlinden, chief economist at the Center for Automotive Research, said, "I believe the union will say: 'We will give you a VEBA, but that's it for restructuring. You cannot downsize'" or shut down plants down temporarily (Merx, Detroit Free Press, 7/23).
  
  
• AP/Houston Chronicle: Unfunded liabilities for retiree health care are a concern "that is just now coming to the forefront of the auto industry and one that has yet to be handled by many" U.S. businesses and agencies, the AP/Chronicle reports. State and local governments nationwide have an estimated combined $1.5 trillion liability for retiree health care, and most have no money set aside to cover the cost. The VEBA approach may provide a "possible solution" to the potential difficulties presented by unfunded liabilities, according to the AP/Chronicle (Krisher, AP/Houston Chronicle, 7/21).
  
  
• New York Times: In previous negotiations, UAW used a "pattern bargaining" approach, under which it "negotiated a contract with one carmaker, then persuaded the others to accept virtually the same terms, ensured that labor costs did not put one company at a disadvantage -- letting the success of their vehicles determine their fates," the Times reports. However, according to the Times, "This time around, ... the companies are in vastly different positions, not only in comparison with the last contract negotiations in 2003 but also relative to each other." Clark University labor relations expert Gary Chaison said, "I don't think identical patterns ... are really possible anymore. Each of the Big Three is unique now" (Bunkley, New York Times, 7/21).
  

Broadcast Coverage
CBS' "Evening News" on Friday reported on talks between Chrysler and UAW. The segment includes comments from auto industry analyst John McElroy and union members (Cordes, "Evening News," CBS, 7/20). Video of the segment is available online.

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