UAW Urging Membership To Approve Ford Survival Plan That Would Allow Half Of VEBA Payments In Stock

Main Category: Health Insurance / Medical Insurance
Also Included In: Seniors / Aging
Article Date: 26 Feb 2009 - 5:00 PDT

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United Auto Workers President Ron Gettelfinger in a letter to Ford Motor's UAW members wrote that the automaker could collapse if members do not ratify a proposal to alter a 2007 labor agreement, the Detroit Free Press reports. On Monday, UAW and Ford announced a tentative deal that would allow Ford to make as much as half of the payments it owes to a retiree health care trust fund in the form of company stock. The firm owes about $13.6 billion to the fund, known as a voluntary employee's beneficiary association.

According to the deal, UAW would receive the stock payments in small installments over a long period of time and would be allowed to immediately sell that stock. A summary of the deal obtained by the Free Press states, "It is important that investments in the VEBA be diversified." The value of that stock also would have to reflect its value when contributed to the fund, according to the deal. In addition, the agreement would eliminate the UAW jobs bank program that pays laid-off workers at their previous rates and would modify a supplemental unemployment benefits program (Snavely, Detroit Free Press, 2/25).

A UAW statement released Tuesday said that the union's council representing Ford workers nationwide is recommending that members approve the deal. The council's talks on the deal are expected to be completed by March 9 (Gopwani, Detroit Free Press, 2/24). The plan also is expected to "serve as a pattern for the UAW's negotiations with General Motors and Chrysler," which are required by the terms of federal loans approved in December 2008 to seek permission from the union to make half of their VEBA payment using company stock (Detroit Free Press, 2/25).

In related news, representatives from the Big Three automakers met with an auto task force commissioned by President Obama this week to discuss restructuring options available to the firms. GM and Chrysler have until March 31 to present a final plan for becoming and remaining financially viable and competitive in order to receive the rest of the $17.4 billion in loans granted in December 2008. Spokespeople from the automakers refused to comment on the discussions (Dolan et al., Wall Street Journal, 2/25).

Delphi
U.S. bankruptcy Judge Robert Drain on Tuesday ruled that autoparts maker Delphi has the right to eliminate health coverage for 15,000 salaried retirees, stating that the company has a "fiduciary duty to terminate the benefits." The move will allow the company, the largest parts supplier to GM, to save more than $200 million through 2011 and remove more than $1.1 billion in liabilities from its balance sheet. The firm has been reorganizing since 2005, when it filed for Chapter 11 bankruptcy. Delphi attorney John Butler said that the company's bankruptcy lenders "simply will not support having discretionary liabilities of this magnitude on the reorganized balance sheet."

Drain said that Delphi "properly did not take this step for almost three years," but during the last "two or three months their business has gone through such enormous adverse changes." Drain allowed for a committee of retirees to be established to determine whether some retirees are eligible to continue receiving coverage sponsored by Delphi. According to Bloomberg News, that about 1,600 objections to the cuts have been filed by workers (Larson, Bloomberg News, 2/25). Delphi Executive Chair Steve Miller at the hearing said, "We were very aware this would be a significant hardship imposed on all our retirees" (McLaughlin, Wall Street Journal, 2/25).

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.

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