UAW Agrees On Tentative Contract With Ford That Includes VEBA

Main Category: Health Insurance / Medical Insurance
Also Included In: Seniors / Aging
Article Date: 06 Nov 2007 - 12:00 PDT


Negotiators for United Auto Workers and Ford Motor on Saturday reached an agreement on a tentative four-year contract that follows the pattern set by General Motors and Chrysler Group and includes the creation of a voluntary employees' beneficiary association, the New York Times reports. Under the VEBA, Ford would transfer billions of dollars in retiree health care liabilities to a UAW-controlled trust (Maynard/Bunkley, New York Times, 11/4).

The Detroit News reports that Ford would not contribute as much cash to the VEBA as GM and Chrysler. Ford would pay 40% of VEBA contribution in cash, compared with 54% at GM and 59% at Chrysler. Ford instead would invest cash in its plants to improve flexibility that will allow them to produce more than one type of car model (Detroit News, 11/5). Ford would make up the remainder of its contribution to the VEBA in equity and convertible debt, another person involved in the talks said.

If the deal is approved, UAW would become a major investor in the automaker, with a 16% to 17% stake in the company. Like GM and Chrysler, Ford would continue to fund its retiree health care until 2010, when the VEBA is expected to become operational. One person close to the Ford negotiations said that Ford's retiree health care liability would stand at about $17 billion by then. Currently, retiree health care liabilities total about $22 billion (Spector/McCracken, Wall Street Journal, 11/5).

Although details have not been released, the contract also is expected to include a two-tier wage system for new and noncore workers, along with job buyout plans, according to the Times (New York Times, 11/4).

UAW Vice President Bob King in a statement said, "We face enormous challenges and we also have enormous potential," adding, "Our goals for this contract were to win new product and investment, to enhance job security and protect seniority, and we made progress in all these areas" (Freeman, Washington Post, 11/4).

Rank-and-File Ratification Up Next
UAW President Ron Gettelfinger and King on Monday are expected to bring details of the deal to UAW local officials representing Ford workers, the Detroit Free Press reports (Webster, Detroit Free Press, 11/5).

If Ford's UAW local leaders approve the deal, the 54,000 rank-and-file members will vote on the contract, a process that is expected to take about two weeks, the Times reports (Maynard, New York Times, 11/5). "It is unclear how much rank-and-file opposition the Ford deal will face," according to the Journal (Wall Street Journal, 11/5).

The AP/Boston Herald reports that the deal might "face a tough ratification vote at Ford because of Chrysler's actions" last week to cut between 8,500 and 10,000 hourly jobs and 2,100 salaried jobs from now until the end of 2008. The cuts, which came a week after Chrysler's contract was ratified, amount to about 15% of the company's work force (AP/Boston Herald, 11/3).

People close to the deal said that Ford promised to keep open two plants it had planned to close and to avoid closing any other plants during the four-year contract (Wall Street Journal, 11/5). Ford already has called for the closure of 16 plants as part if its Way Forward plan, including the two it decided to spare as part of the contract, according to the Free Press (Detroit Free Press, 11/5).

Opinion Piece
The "troubles" with paying for retiree health care at the Big Three "underscore the enormous competitive burden that health care costs impose on American companies," Rep. Rahm Emanuel (D-Ill.) and Bruce Reed, president of the Democratic Leadership Council, write in a Washington Post opinion piece. They continue, "It's not just the Big Three," noting that in 2008, health care costs of Fortune 500 companies "will exceed their total profits," making it "no wonder" that the number of businesses offering employer-sponsored health care has "dropped from 69% to 60% since 2000, and only half of small firms now offer health benefits at all."

They write, "Instead of waiting for American workers and businesses to again find themselves against the wall, we should act now to let companies and unions buy their early retirees into Medicare" (Emanuel/Reed, Washington Post, 11/5).

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