Negotiations Between UAW, GM Continue; VEBA's Complexities Drawing Out Talks

Main Category: Health Insurance / Medical Insurance
Also Included In: Seniors / Aging
Article Date: 20 Sep 2007 - 11:00 PDT

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Although United Auto Workers and General Motors contract negotiators generally agree on creating a voluntary employees' beneficiary association that would shift more than $50 billion in retiree health care obligations to the union, a contract agreement "remained elusive" during talks on Monday, the Detroit Free Press reports (Merx/Higgins, Detroit Free Press, 9/18).

Ford Motor and GM in August formally 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 that the union would manage. Last week, UAW selected GM, which has been the strongest proponent among the automakers of creating a VEBA, as its lead negotiation partner. The GM contract, which expired on Friday, is being extended on an hourly basis. Contracts with Ford and Chrysler Group have been extended indefinitely while negotiations between UAW and GM are under way. In a move to push acceptance of a VEBA, GM offered to cap out-of-pocket health care costs for UAW workers, sources have said. If the VEBA deal is approved, it could lead to benefit reductions because the trust likely will not be designed to handle double-digit medical cost inflation (Kaiser Daily Health Policy Report, 9/17).

One source close to the talks said the terms of the VEBA have been worked out, including a provision for the automakers to give additional funding in the future if the trust's investments are weak or if health care costs rise faster than expected. Other sources have said there is work remaining on the VEBA deal (Freeman, Washington Post, 9/18). According to the Detroit News, GM's position that it will not fund the trust at more than 65 cents on the dollar might be contributing to the "tension related to the VEBA."

Harley Shaiken, a labor expert from the University of California-Berkeley, said the negotiations are slow because the issue is so complex. "The VEBA involves risk. There's no getting around it," he said, adding, "You're projecting how fast health care will rise, which is tough to do. You're also projecting what the stock market will do, which is an equally tough thing to do." Contract talks on Monday concluded at about 9 p.m. and are set to resume Tuesday morning.

Rank-and-File Members
Ron Harbour -- president of Harbour Consulting, which tracks auto factory productivity -- said that negotiations will have to consider the need for UAW's rank-and-file members to approve the contract. He said, "They're thinking now, 'Whatever we do come up with, we have to sell.'" A signing bonus for contract ratification is being considered, the News reports. In addition, in light of GM's overfunded pension, there has been some discussion about increasing pension benefits to help protect retirees if there is a shortfall in health care funding, according to the News (Terlep/Vlasic, Detroit News, 9/18).

There are mixed reactions among rank-and-file union members, the AP/Raleigh News & Observer reports. Opponents of the trust say retirees could face higher out-of-pocket costs, reduced coverage or even lose health insurance altogether if the VEBA goes bankrupt. Gregg Shotwell, a union activist, said, "We know the union is going to have to go to retirees and demand more out-of-pocket expenses to cover the shortfall" because the trust will be underfunded (AP/Raleigh News & Observer, 9/18).

Former UAW executive board members on Sunday sent a letter to union members saying a VEBA would "undo decades of hard won health care benefit protections, paid for in large part by wage diversions, past concessions and increased worker productivity." Paul Schrade, one signer of the letter, said that a VEBA also could negate six decades of union support for a universal health care system. "If GM shifts the burden of administration over to the union, they have no responsibility at that point, no care in the world to go to Congress to achieve universal health care or health care for their workers," Schrade said (Washington Post, 9/18).

The Wall Street Journal notes that gaining the support of local UAW presidents is a necessity to get the agreement approved because they "hold considerable sway when it comes to how workers will vote." Dave Green, president of UAW Local 1714 in Lordstown, Ohio, said that a VEBA would not be a "bad thing at all," adding, "My spin on this is I'd rather have my brothers and sisters in the union managing this obligation instead of management" (Stoll/McCracken, Wall Street Journal, 9/18).

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.

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