The Wonk Room

GM Pushes UAW To Accept More Health Care Concessions

The New York Times leads this morning with word that General Motors– which is busily restructuring itself to “justify its use of a $13.4 billion loan package from the federal government” — is pushing the United Auto Workers (UAW) to accept serious concessions on retiree health care benefits:

G.M. has the most at stake with the U.A.W. Its future obligations for retiree health care are estimated at $47 billion, and by next year it is required by its contract to contribute more than $10 billion to the trust set up in 2007.

The company, which nearly ran out of money before receiving the first $9.4 billion of its $13.4 billion in late December, is pressing the U.A.W. to accept stock for as much as 50 percent of its next contribution to the trust, according to two people knowledgeable about the discussions.

Recall that in 2007, GM struck a deal with the union to remove $51 billion of retiree health obligations from its balance sheet by contributing to a new trust fund for retiree health benefits. In return, the union got “to set and manage the health-insurance benefits.” Now, the company seems to be balking its commitment, pressing auto workers “to accept stock for as much as half of its next contribution to the trust.” On Saturday, the UAW called proposals to modify a union-run health care fund “a non-starter.”

Indeed, GM’s so-called compromise jeopardizes the future of the trust and may force the labor union to shoulder more of the cost or cut back on health benefits. As Phyllis Borzi, a research professor in health policy at the George Washington University pointed out in 2007, “the nature of GM’s contributions is almost as important as the size.” As an employee, “I would want cold hard cash — I don’t want any employer stock or any of that stuff in there,” Borzi said.