UAW Focuses On Ford; Chrysler's VEBA Funding Level Lower Than GM's

Main Category: Health Insurance / Medical Insurance
Also Included In: Seniors / Aging
Article Date: 15 Oct 2007 - 1:00 PDT

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United Auto Workers President Ron Gettelfinger on Thursday said he expects the union to reach a contract agreement with Ford Motor that is similar to a tentative deal with Chrysler Group, which included creating a union-run voluntary employees' beneficiary association to assume the automaker's retiree health care liabilities, the Detroit Free Press reports (Higgins, Detroit Free Press, 10/12).

The Chrysler deal generally followed the pattern set by General Motors' contract, which was ratified on Wednesday (Durbin/Krisher, AP/St. Louis Post-Dispatch, 10/12). "We like to do a little ... adjustment, depending on the company we're at," Gettelfinger said of the Chrysler deal, adding, "But in this case, it is basically a pattern agreement."

Two common elements of the deals are creating a VEBA and establishing second-tier wages and benefits for noncore workers, according to the Free Press (Detroit Free Press, 10/12). Erich Merkle, vice president of auto industry forecasting for IRN, said he is concerned that UAW will push for Ford to follow the pattern when its needs are different than Chrysler's and GM's (AP/St. Louis Post-Dispatch, 10/12).

According to McClatchy/Salt Lake Tribune, the total savings for Ford from a VEBA would not come close to matching the savings for GM, which has three times as many retirees and spouses receiving health benefits as Ford has. Ford "could prove to be the most challenging of Detroit's Big Three," according to McClatchy/Tribune (Langlois, McClatchy/Salt Lake Tribune, 10/11). Industry analysts said that Ford will try to win more concessions than Chrysler (AP/St. Louis Post-Dispatch, 10/12).

Gettelfinger said negotiations with Ford would not accelerate until the Chrysler contract has been ratified (Vlasic/Aguilar, Detroit News, 10/12). Gettelfinger said, "I am hoping we can go to Ford and come out of there with a tentative agreement, without having any kind of altercation."

Chrysler Deal
UAW is working to approve the Chrysler contract with the union's local leaders so it can hold a ratification vote with Chrysler's rank-and-file members, the Free Press reports (Detroit Free Press, 10/12). The Chrysler deal has slight differences compared with the GM deal, one of which is the amount the automaker will contribute to the VEBA. GM will make a contribution to the VEBA worth about 70% of its retiree health care liabilities, or about $29.9 billion.

If Chrysler's contract is ratified, the automaker would contribute about 55% to 60% of its liabilities, a figure estimated at between $10 billion and $11 billion, according to the News. Cerberus Capital Management -- which bought Chrysler from Daimler, formerly DaimlerChrysler -- "pushed hard in negotiations for better terms for the VEBA," the News reports. In addition, Chrysler reportedly won health care concessions granted to Ford and GM in 2005 that are valued at about $340 million annually for the automaker (Detroit News, 10/12).

UAW on Thursday filed a class-action lawsuit against Chrysler that asks the judge to block the automaker from unilaterally changing or removing health care benefits, according to the Free Press. UAW took the same action with GM in 2005 when it created a smaller version of the VEBA as part of the health care concessions reached in those negotiations. Experts say the lawsuit is a step by UAW to strengthen its legal rights to negotiate such actions before it creates the VEBA. The VEBA must be approved by the courts and the Securities and Exchange Commission (Detroit Free Press, 10/12).

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