Negotiations Continue Between Automakers, UAW Over VEBA Contributions

Main Category: Health Insurance / Medical Insurance
Also Included In: Seniors / Aging
Article Date: 20 Feb 2009 - 5:00 PDT

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A proposal for automakers to pay half of their required contributions to a retiree health care trust fund in the form of company stock has "become a major sticking point" in negotiations among General Motors, Chrysler Group and United Auto Workers, the Detroit Free Press reports. In granting $17.4 billion in loans to GM and Chrysler, the federal government required the automakers to ask UAW to accept stock instead of cash to fund half of their obligation to a voluntary employee beneficiary association. The firms must show that they can become more competitive in order to receive the full loans (Snavely, Detroit Free Press, 2/19). The 2007 VEBA agreement states that GM must pay about $20 billion into the fund this year, while Chrysler owes about $9.9 billion this year and Ford Motor owes about $6.3 billion. Although Ford has not asked for government loans, CEO Alan Mulally said he expects the company to get the same concessions from UAW as GM and Chrysler (Krisher/Johnson, AP/Detroit News, 2/18).

According to the Free Press, UAW has agreed to tentative terms in a "variety of key areas" discussed by negotiators, but the union has "drawn a line in the sand over the government's stock proposal" (Detroit Free Press, 2/19). The automakers submitted preliminary restructuring plans to the government Tuesday -- a deadline set by the original rescue agreement -- but the plans did not include signed term sheets from UAW and bondholders stating their agreement with cost-saving provisions, such as the VEBA payments (Snell, Detroit News, 2/19).

UAW is concerned that accepting too much stock could leave the fund without enough money to pay for benefits for hundreds of thousands of retired works and their spouses, the AP/News reports. However, according to the AP/News, "if the UAW refuses to take the stock and GM and Chrysler don't satisfy the government's loan terms, the companies could tumble into bankruptcy, putting those benefits into greater jeopardy" (AP/Detroit News, 2/18).

Negotiators have not said when the issue of the VEBA payments might be settled. Gary Chaison, a labor professor at Clark University said that UAW is "having second thoughts of taking on the responsibility of the VEBA," adding, "They are reluctant to let GM off of their obligation" (Aguilar, Detroit News, 2/19).

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