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UAW Retiree Health Care Looms as Obstacle in Bailout Talks

February 12, 2009
Related Topics: Benefit Design and Communication, Labor Relations, Latest News
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Health care for UAW retirees is looming as a major controversy in crucial bailout negotiations at General Motors.

The United Auto Workers won’t accept further concessions on retiree health care costs unless GM creditors make substantial sacrifices to reduce the automaker’s crushing debt burden, said a source familiar with the union’s position.

Only six days remain until GM and Chrysler file viability plans with the federal government. Those plans are supposed to include major cost-cutting sacrifices by all stakeholders.

Under the terms of a $13.4 billion emergency loan commitment, the federal government wants two-thirds of GM’s debt exchanged for equity.

GM and government officials met with bondholders and creditors in Detroit on Monday, February 9, to see whether the creditors would do so. Those creditors hold $45 billion worth of GM debt. GM spokeswoman Julie Gibson declined to comment.

The UAW is insisting that the creditors make concessions, the source said. So far, the union thinks, it is the only party—among bondholders, dealers and suppliers—that has made major concessions to help GM keep its loans.

The government can call in the loans and put both GM and Chrysler in Chapter 11 bankruptcy if officials deem the viability plans inadequate. The union wants to avoid that outcome, the source said. But union officials think they cannot continue to bear what they call a disproportionate share of the sacrifices.

The debate centers on the UAW’s retiree health care trusts, known as voluntary employee beneficiary associations. Under terms of the federal bailout, the UAW is supposed to accept GM stock in place of cash for half of the automaker’s $26 billion obligation to the health care trust.

That’s a big problem for UAW president Ron Gettelfinger, the source said.

Gettelfinger insists that the union already swallowed a massive concession when it negotiated the VEBAs in 2005 and 2007, the source said. Together, those earlier agreements cut GM’s UAW health care obligation from $50 billion to $26 billion.

Now the union is being asked to take risky GM equity for half the remaining $26 billion obligation. That’s an untenable sacrifice when other stakeholders haven’t even anted up yet, the source said.

“That’s what Ron means when he says the UAW has gone to first base, second and third to help GM when the others haven’t even entered the stadium,” the source said. UAW spokeswoman Christine Moroski declined to comment for this story.

What’s more, the UAW last month agreed to end the Jobs Bank at the Detroit Three. Under the Jobs Bank, long-term idled workers collected about 95 percent of wages and benefits while not working. The Jobs Bank could have cost GM alone up to $2.1 billion over the four-year life of its UAW contract signed in 2007, the contract shows.

Filed by David Barkholz of Automotive News, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com

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