VEBA Deal Between UAW, Big Three Automakers Uncertain, Insiders Say

Main Category: Health Insurance / Medical Insurance
Also Included In: Seniors / Aging
Article Date: 13 Sep 2007 - 9:00 PDT

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With the current contract set to expire on Friday, a deal between the United Autoworkers and Detroit's big three automakers -- Ford Motor, General Motors and Chrysler -- that would establish a health care trust to fund retiree benefits "is getting dicey with so much work to be done," according to sources close to the negotiations, the Detroit News reports (Terlep, Detroit News, 9/11).

Ford and GM in August asked UAW to assume responsibility for the health care benefits of more than 1.5 million working and retired employees. Under the arrangement, the companies would transfer retiree health care obligations to an independent trust fund, known as a voluntary employee beneficiary association, that the union would manage (Kaiser Daily Health Policy Report, 9/4).

If no deal is reached by Friday, one of three scenarios is likely to emerge: the two sides could continue operating under the current contract as negotiations continue; the union could strike; or the automakers could lock down their factories. The latter options are unlikely because both sides want to avoid a work stoppage that would do further damage to the companies, according to the News (Detroit News, 9/11).

The automakers are seeking a deal under which they would fund a VEBA at 60% to 70% of future obligations, the Chicago Tribune reports (Popely, Chicago Tribune, 9/11). According to sources, UAW President Ron Gettelfinger is reluctant to approve a VEBA, while the automakers are resisting the union's request of job security in exchange for a deal.

Contract negotiations between UAW and the Big Three typically continue "until the last minute," but "this year's negotiations are exceedingly complex and weighty" because of the fragile state of the U.S. auto industry, the News reports. David Cole, chair of the Center for Automotive Research, said, "It's really tough to think they're going to pull everything together" by Friday. He added, "They have all the ingredients for a deal. It's just that weaving them together is really tricky to do" (Detroit News, 9/11).

WSJ Profiles Wagoner
In related news, the Wall Street Journal on Tuesday profiled GM CEO Rick Wagoner, whose "top priority" in the UAW negotiations is "leaning on the union to further address the automaker's health care burden" (Stoll, Wall Street Journal, 9/11).

Reprinted with kind permission from http://www.kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, or sign up for email delivery at http://www.kaisernetwork.org/dailyreports/healthpolicy. The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation© 2005 Advisory Board Company and Kaiser Family Foundation. All rights reserved.