Ford, GM Ask UAW To Administer Health Care Benefits

Main Category: Health Insurance / Medical Insurance
Article Date: 28 Aug 2007 - 8:00 PDT

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Ford Motor and General Motors officially have asked the United Auto Workers to assume responsibility for the health care benefits of more than 1.5 million working and retired employees, the Detroit News reports. According to the News, such a request was "largely anticipated" and would free the automakers from future obligations (Terlep, Detroit News, 8/24). UAW last month began contract negotiations with GM, Ford and Chrysler Group. UAW contracts with the automakers will expire on Sept. 14.

The automakers, which have an estimated $90.5 billion in unfunded retiree health care obligations, have considered 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, or voluntary employee beneficiary association, that the union will manage. 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. Goodyear agreed to fund 83% of total retiree health care obligations, but the automakers likely will seek to fund 50% to 60% of total obligations (Kaiser Daily Health Policy Report, 7/25).

Himanshu Patel, an analyst at JPMorgan, last month said Ford and GM might be able to convince UAW to take over retiree health care for about 50 cents to 70 cents on the dollar. At a funding level of 60%, GM would contribute about $29 billion to the VEBA and Ford would contribute about $12.5 billion, Patel said. Auto industry experts have said the companies would be able to afford the contributions, because the automakers have been putting aside money for retiree health care and could raise additional funds through existing financing and asset sales.

Ford CEO Alan Mulally on Wednesday said that he is "cautiously optimistic" that a deal will be reached. Spokespersons for Ford and GM declined to discuss a potential agreement on health care or contract negotiations. A spokesperson for Chrysler, which is no longer a publicly traded company, said the automaker is considering a number of options for reducing health care costs that might not include a VEBA (Detroit News, 8/24).

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