Ford UAW Membership Approves Plan To Use Stock For Half Of VEBA Payments

11 Mar 2009, Medical News Today

United Auto Workers on Monday said a majority of its Ford Motor membership approved contract changes that, among other things, allow the automaker to pay as much as half of what it owes to a retiree health insurance trust fund in the form of company stock, the Wall Street Journal reports (Dolan, Wall Street Journal, 3/10). Detroit's Big Three automakers and UAW in 2007 established a voluntary employees' beneficiary association to provide health coverage for about 800,000 retired workers and their spouses. Under that deal, Ford owes about $6.3 billion to the VEBA by the end of the year, while General Motors owes about $20 billion and Chrysler Group owes about $9.9 billion. The VEBA is scheduled to pay all health care costs for union workers beginning Jan. 1, 2010 (Kaiser Daily Health Policy Report, 2/24).

In the latest concessions, 59% of production workers and 58% of skilled-trades workers voted in favor of the agreement, UAW said. The agreement also freezes workers' pay, suspends bonuses and suspends a lay-off program called the jobs bank, the Detroit News reports (Aguilar, Detroit News, 3/9). Ford and UAW leadership last month agreed to the plan as a way to help Ford control costs and become more competitive with foreign firms. Ford is the only one of the Big Three automakers that was not required to seek such concessions by the terms of federal loans granted late last year by former President George W. Bush (Wall Street Journal, 3/10).

UAW President Ron Gettelfinger in a written statement said, "By working together with our UAW partners, we identified solutions that will help Ford reach competitive parity with foreign-owned auto manufacturers and that are important to our efforts to operate through the current economic environment without accessing a bridge loan from the U.S. government" (Johnson, AP/Kansas City Star, 3/9). UAW Local 249 President Jeff Wright said, "Nobody likes concessions, but our members understand how bad the economy is right now. If we're not selling cars, we have to do what's needed to survive" (Heaster, Kansas City Star, 3/9).

Aaron Bragman, an auto analyst with IHS Global Insight, said, "Now the pressure is on to get a similar agreement at GM and Chrysler. Time is running out," adding, "It's ironic that Ford was able to accomplish it, being the one that doesn't have an agreement with the government" (AP/Kansas City Star, 3/9).

Chrysler, GM
GM and Chrysler are required by the terms of the federal loans to ask that UAW accept half of their VEBA payments in stock (Kaiser Daily Health Policy Report, 2/24). The Ford agreement is expected to serve as a model for negotiations between GM and Chrysler, who must submit restructuring plans to the government by March 31 to receive the remainder of the federal money, according to Harley Shaiken, a University of California-Berkeley labor professor and auto industry specialist. The two firms have received $17.4 billion so far from the government and are seeking an additional $21.6 billion (Aguilar, Detroit News, 3/10). However, Chrysler, a privately held company, does not have public shares to use for VEBA payments. It would have to grant partial ownership of the firm to the union, according to a person familiar with the negotiations (AP/Kansas City Star, 3/9). A Chrysler spokesperson declined to comment on the matter. Meanwhile, GM and UAW continue to have "very active" talks about VEBA payments, according to a person familiar with the talks (Wall Street Journal, 3/10).

President Obama's auto task force, which will review the automakers' restructuring plans, visited Detroit yesterday as part of its "fact-finding" activities, the Washington Post reports. The group toured several facilities and met with Gettelfinger and GM CEO Rick Wagoner (Marr, Washington Post, 3/10).

Reprinted with kind permission from http://www.kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, or sign up for email delivery at http://www.kaisernetwork.org/dailyreports/healthpolicy. The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation.

© 2009 Advisory Board Company and Kaiser Family Foundation. All rights reserved.

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