UAW Takes On Big Three Automakers’ Healthcare Plans

United Auto Workers (UAW) union president Ron Gettelfinger says that they will be prepared to take over the health care plans for the three U.S. Automakers beginning January 1, 2010. He said, We’ve got a team put in place to make sure everything works as it is supposed to. It’s been a huge project, but we are ready for it.

The health care fund established by the UAW will cover 675,000 retirees plus spouses according to an estimate from August 2009 made by the Center for Automotive Research in Ann Arbor, Michigan. As a result, GM and Chrysler will save billions in expenses in exchange for cash and stock payments into the fund.

Contributions to the fund by Ford will be $1.91 billion, $585 million from GM and $315 million in July from Chrysler. Labor relations professor Harley Shaiken of UC-Berkeley says, It’s really a major moment, symbolically and substantively, for the companies and the union. This didn’t come cheaply, but it clearly diminishes the risk and cost for the companies.

Transferring the funds is a part of the money-saving concession from labor negotiations in 2007 known as Voluntary Employee Beneficiary Association (VEBA). VEBA funds will now cover the automakers retirees and spouses.

The money was kept safe during the bankruptcy proceedings of Chrysler and GM; this gave the UAW a stake in the companies in exchange for agreeing to accept a lower amount of cash investment from them. Some Chrysler creditors were concerned about the arrangement, saying that the UAW health care funds were given priority over bank lenders with secured loans.

The original agreement made in 2007 called for contributions from the big three totaling $54 billion to fund VEBA in exchange for the trimming of about $7 billion in retiree health care expenses and $87 billion in future expenses.

The cuts were agreed to by the UAW union along with swapping $21 billion in cash for equity and later payments as the economy faltered in 2009 and the government requested additional concessions from the UAW in order to grant more aid. For their concessions, the UAW received 17.5% of GM and 55% of Chrysler.

Gettelfinger spoke about VEBA and making the concessions: If you look at the alternatives, what were there? We are comfortable that it is going to work out.

The automakers will make ongoing payments to VEBA to keep it funded. VEBA funds will also sell GM and Chrysler stock after the companies have an initial public offering. According to the companies, this will happen next year for GM and after 2011 for Chrysler.

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