UAW Shows "Flexibility"

UAW President Ron Gettelfinger said on a Detroit radio program on Monday he is considering offering some health care concessions to Chrysler, now that the company is posting losses. Gettelfinger said, "We've been talking to Chrysler quite frequently -- we do need to find a way to fix the problem there now that Chrysler is in a downward mode."

Detroit News reports

While the UAW has historically fought to preserve top-tier health benefits for retirees, the union has shown some flexibility in light of the severe financial issues facing Detroit's automakers.

Gettelfinger is looking for a deal similar to that offered to Ford Motor and General Motors back in 2005, which were posting high enough losses to warrant the reduction in health care benefits.

The deal required GM and Ford retirees to accept modest co-pays and deductibles, while active UAW employees gave up $1 an hour in raises.

Personally, this doesn't sound like such a big deal, considering Chrysler is in the red, although I admit I have NO idea how much autoworkers earn. If the reduction in benefits amounts to increased competitiveness with foreign imports, that would be a good thing, in turn perhaps keeping a greater number of workers employed in the long-run.

I think retirees are going to be screwed though. If you're promised one thing when you retire, and then a couple of years down the road it changes, it doesn't give you proper time to adjust your budgeting. Gettelfinger does seem particularly concerned about this, which is good. I personally think retirement benefits will go by the wayside in favor of 401(k)s, it's just going to be a painful phasing out.

**Closing quote from Troy Clarke, GM's North America's chief: "If there is a cost that keeps me up at night, it's health care. We have the retiree health care issues and it's very stressful. We've got to come at that some way.

More coverage from the Associated Press.

More coverage from the Detroit Free Press.

Carmaker drama continues

Associated Press today reported more on the high cost health care puts on car manufacturers.

General Motors, Ford and Chrysler will seek labor cost reductions that put them on par with their Asian rivals during summer contract talks with the United Auto Workers, officials of the three automakers said Wednesday.

Detroit News columnist Daniel Howes, citing people familiar with Ford's bargaining strategy, reported earlier Wednesday that Ford would seek to cut hourly labor costs by 30 percent, from about $71 to around $50, including wages, pension and health care.

That's a pretty huge cut for workers and while UAW can fight some of it, I don't think Gettelfinger will be completely successful in blocking health care and pension benefit reductions. AP continues

UAW spokesman Roger Kerson would not comment Wednesday, but union President Ron Gettelfinger said in March that it made major health care concessions in 2005 to Ford and GM that saved the companies billions, and he implied that the union wasn't willing to give more. The UAW has completed an evaluation of Chrysler's finances but won't say whether it will give Chrysler the same deal.

More news on health care cost crisis for car makers...

CEO and Chair of General Motors Rick Wagoner discussed the effects of health care costs on the company's bottom line. AP/Philadelphia Inquirer reports:

[Wagoner] said that the company had made progress with the United Auto Workers in becoming more competitive, but that more needed to be done in forthcoming national contract talks this summer.

GM, he said, needs to "further reduce our still-unsustainable health-care bill, which was a staggering $4.8 billion in 2006."

A couple of the big automakers are discussing creating a trust fund of sorts for workers' health care, which would allow them to put in a set amount and allow the unions to control how the money is spent (called a VEBA, or Voluntary Employee Benefit Association). A May article in Business Week, writes that leaders at GM, Ford , and Chrysler "believe they may have a cure for Detroit's epic health-care woes" in VEBA.

VEBAs would hand "over the companies' long-term liability to an independent fund managed by the UAW, which would be financed by a huge one-time injection of cash and stock. Union workers would probably contribute more toward their own coverage costs but would gain protection from the devastating prospect of bankruptcy."

I'm not sure how I feel about VEBAs yet, but they seem like a pragmatic compromise if done fairly.