GM-UAW Contract Talks: Health Care Sidelined â for Now
By Michelle Krebs September 20, 2007General Motors and the United Auto Workers union, at an impasse on a proposed union-run retiree health-care fund, reportedly have set aside that issue for the moment and moved onto other matters.
After negotiating all day Wednesday on health care, UAW President Ron Gettelfinger ended discussions on creating a Voluntary Employees Beneficiary Association (VEBA) for now.
Instead, negotiators for both sides are expected to be back at the bargaining table sometime Thursday â the sixth day since the September 14 expiration of the UAWâs four-year contract.
They will discuss other issues -- sticky ones. They include wage cuts for active employees, higher insurance co-pays for active workers, cutting back on overtime, outsourcing of jobs and a two-tier compensation structure that pays new hires less than current employees, gives them lesser health-care benefits and no pension, perhaps a 401(k) instead.
But undoubtedly, health care will be back at the forefront sometime within the next couple days as it is the most critical issue of these negotiations.
GM wants to create a VEBA in order to shift $50 billion of future retiree health-care liabilities to the union-run fund. The fund would get the liabilities off GMâs books. Further, GM wants to make a one-time payment into the fund and call it a day. Bloomberg News reports that the two sides canât agree on how much money GM would deposit into the fund.
The two sides are billions of dollars apart, the Wall Street Journal reports. Both sides have computer models that show GMâs future retiree health-care obligations at different amounts, the paper reported.
Further, GM is counting on some kind of universal health care coverage to be enacted by the federal government in the future and wants a provision for a refund if and when that occurs.
GM had proposed depositing a combination of cash and stocks, which the union opposes because of the volatility of stocks. The union also wants a backstop that requires GM to deposit more money if the fund risks running dry. Indeed, Goodyear Tire Co., which is blazing the trail for VEBAs in the auto industry, likely will have to deposit more as the fund is running low.
GM and Ford argue that a VEBA will go a long way in helping the two companies stem losses and become competitive with transplant manufacturers. They estimate they pay $25 to $30 an hour more than their Asian counterparts in the U.S., who are stealing market share. In a note to investors obtained by the Associated Press, Morgan Stanley analyst Jonathan Steinmetz predicted that VEBAs would save the Detroit automakers $200 per vehicle.
If GM is not able to negotiate such a fund, it will be considered a huge setback for the automaker. Already, the stock market has sent GM stock higher, based on optimism that a VEBA will be established. Further, if GM doesnât succeed in creating such a fund, Ford wonât be able to either, and analysts estimate Ford would actually benefit more than GM.
Further, if a VEBA is not formed, GM will look for other ways to close the compensation gap with its competitors. That could mean closing plants -- a huge risk to the union, which would lose dues-paying members. GM, now much better positioned globally than it was when the last contract was negotiated, could send production â- and union jobs -â to plants outside of the U.S. GM already has announced plans to close 12 plants and has eliminated more than 34,400 union jobs.
Meantime, UAW workers at GM remain on the job for the time being, as do those at Ford and Chrysler, which have indefinite contract extensions pending the outcome of the GM talks. The current four-year contract between the UAW and GM, Ford and Chrysler covers 180,681 active workers as well as 419,621 retirees and surviving spouses.
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