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Vol. 73/No. 10      March 16, 2009

Ford pact with UAW cuts
retirees’ health-care funds
Ford Motor Company reached agreement with United Auto Workers (UAW) officials February 23 on a plan that puts health-care funds for retired auto workers in serious jeopardy. The deal allows Ford to pay up to 50 percent of the $13.2 billion it owes to a retirees’ health fund in stock instead of cash.

Ford stock is close to worthless today, valued at about $1.80 a share, down 72 percent over the past 12 months. General Motors shares, which plummeted 92 percent from a year ago, are at about the same value.

“We will use our discretion in determining whether cash or stock makes sense” for “preserving shareholder value,” stated Joseph Hinrichs, Ford’s Group Vice President for Global Manufacturing and Labor Affairs, in praising the agreement.

The concessions pact with Ford also calls for eliminating cost-of-living pay increases and bonuses of about $1,100 a year, and ending the jobs bank, which provides pay and benefits to laid-off workers. UAW officials unanimously recommended union members ratify these cutbacks by March 9.

Both GM and Chrysler are seeking to impose similar concessions on the union as part of reaching agreement for a new government bailout of $22 billion, which is in addition to the $17.4 billion they have already been given. Ford is currently not requesting such “loans” from the government.

In 2007 Chrysler, Ford, and GM succeeded in ending company responsibility for funding health-care coverage for retired workers. Instead, a union-run trust fund called a Voluntary Employees’ Beneficiary Association (VEBA) was created. GM promised to put about $36 billion into the VEBA, about 70 percent of the company’s prior liability for health insurance. The trust fund is supposed to pay all health-care costs for retired unionists starting Jan. 1, 2010.

Rather than defending the retirees, UAW officials have argued that helping Ford, GM, and Chrysler increase their profits is the best way to save the jobs of those still working. Speaking of the latest deal with Ford, UAW president Ron Gettelfinger said February 23, “The modifications will protect jobs for UAW members by ensuring the long-term viability of the company.”

GM has estimated that it owes $20 billion to the health trust, with more than $10 billion due by next year. Chrysler owes the fund $10 billion. GM is demanding that UAW officials agree to the same deal that Ford got. They are also proposing that $10 billion in cash payments owed to the fund be made over 20 years, said GM chief financial officer Ray Young.

Company-paid health care for active and retired workers were important gains won by the UAW through earlier fights. However, over the past several years the Big Three have succeeded in reducing these benefits for some 800,000 retired auto workers. The 2005 and 2007 contractual agreements forced single retirees to pay a deductible of $159 a month and $11 premiums. The companies’ latest moves will mean much more significant cuts in health-care coverage.

In a related development, the Delphi Corporation, the largest parts supplier to General Motors, received authorization February 24 from the judge presiding over bankruptcy proceedings to end health-care benefits for about 15,000 salaried employees.

According to the Kaiser Family Foundation and Health Research Educational Trust, 20 years ago two-thirds of major U.S. companies that provided employees with health benefits also provided coverage to retirees. This figure has now dropped to less than one-third today.

The auto barons are also seeking to end supplemental unemployment benefits, which for 54 years have provided laid-off workers with as much as 95 percent of their net pay. At GM, the bosses are cutting 47,000 more jobs worldwide—26,000 of them outside the United States. A company spokesperson said the drop in car sales over the last two years is about equal to the production capacity of 24 assembly plants.

With its U.S. sales sharply declining—down 23 percent in 2008—and the threat of bankruptcy looming, GM wants $16.6 billion from the U.S. government on top of the $13.4 billion in loans it already has received. The auto company is also seeking $6 billion in bailout funds from the governments of Canada, Germany, Spain, Sweden, Thailand, and the United Kingdom, for its non-U.S. operations. As part of its reorganization plans to be completed by March 31, GM is seeking to cut “labor costs” by $1.2 billion in Europe, reported the Detroit Free Press.

Thousands of auto workers employed by the Opel, Vauxhall, and Saab divisions of GM demonstrated February 26 to oppose moves to close plants and eliminate jobs. Some 15,000 people rallied at an Opel plant in Ruesselsheim, a suburb of Frankfurt, Germany, that day.

Thousands rallied by GM’s Saab division plant in Trolhattan, Sweden. Saab, a division of GM that employs about 15,000 workers in Sweden, has filed for bankruptcy. Demonstrations were also held at GM factories in Austria, Belgium, France, Poland, Russia, Spain, and the United Kingdom, reported Bloomberg News.  
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