Friday, October 21, 2005

Struggles at General Motors

GM workers lose pay for health care

Retirees pay up to $752 a year; workers give up $1 an hour in '06

By Bill Vlasic / and Sharon Terlep The Detroit News

Coping with the GM cuts How would you deal with the financial impact of these health care spending cuts? Get results and comments Error processing SSI file Comment on this story Send this story to a friend Get Home Delivery

General Motors Corp.'s historic health care deal with the United Auto Workers will require active workers to forgo $1-an-hour in future wage hikes and institute first-ever monthly contributions from UAW retirees.

Local UAW leaders from around the country endorsed the tentative agreement Thursday, paving the way for a ratification vote by union members in the coming weeks on the most significant concessions by the UAW in more than 20 years.

In outlining details of the agreement, UAW President Ron Gettelfinger said the pact was "an essential step" toward fixing GM's mounting financial problems in North America.

"We felt there was a need for us to take some action," Gettelfinger said at a news conference Thursday. "This is a major move on our part."

While the increases would be a difficult break from the fully paid health coverage UAW members have enjoyed for generations, many workers viewed the proposed changes as inevitable.

Given GM's financial problems and the soaring cost of health insurance for workers nationwide, most said they don't expect much rank-and-file resistance to the increases.

"I'm a realist," said Michael Miller, who works at GM's plant in Spring Hill, Tenn. "We don't want to drag down the company. Most people I talked to are OK with paying for some of their health care. It's not like we won't have good coverage."

Still, retirees accustomed to total health care coverage say they will feel the pinch of the new costs.

"Ouch, this is going to hurt," said Leonard Selke, an 85-year-old GM retiree from Utica. "It's still better than I thought it was going to be."

GM reported a $1.6-billion third quarter loss Monday, but said that the UAW agreement will help the company reduce its health care expenses by $3 billion a year before taxes.

It's biggest labor giveback

The across-the-board health care changes for active workers and most UAW retirees represent the biggest labor concessions in the U.S. auto industry since the former Chrysler Corp. flirted with bankruptcy in the early 1980s.

The UAW has 118,000 active hourly workers at GM, and about 500,000 retirees, surviving spouses and dependents whose health-care is covered by the union's contract with the automaker.

While active workers will still be free from monthly contributions and yearly deductibles, they will give up previously negotiated $1-an-hour wage hikes to help fund their health care. Over the course of a year, contribution would total more $2,000, depending on the number of hours worked.

Allen Wojczynski, a 36-year GM employee, said the company's proposal seems acceptable but he wants to see more details before deciding whether to support it. He had been expecting the automaker to ask its workers for pay cuts to trim health care costs.

"I could live with it, giving up $1 an hour of my future pay raises," said Wojczynski, 58, who works at the GM's Ypsilanti parts depot. "But it's frustrating for the workers to have to sacrifice their future pay for the failures of GM, as far as their overseas investments, their design, their engineering, and their who-cares attitude that as long as we build these vehicles, the public will buy them."

According to the UAW, the active workers will defer 17 cents an hour in cost-of-living increases and 83 cents an hour in general wage hikes that were scheduled to take effect next September.

The vast majority of retirees will be hit with monthly contributions, yearly deductibles and other out-of-pocket expenses to help defray health care costs.

Gettelfinger said an individual retiree will pay a maximum of $370 a year for health care, and a retiree with a family will pay up to $752 a year.

One group of retirees will be spared any health care expense. Gettelfinger said that any retiree with an annual pension of $8,000 or less -- about 74,000 people -- will not be affected by the tentative agreement.

"We succeeded in protecting the people who need it most: our lower income retirees," he said.

Both Ford Motor Co. and Chrysler, now owned by German automaker DaimlerChrysler AG, have said they expect health care concessions similar to what GM negotiated.

But Gettelfinger dodged questions about Ford and Chrysler, saying the UAW "has enough on its plate" for now with the GM deal.

Ford Chairman Bill Ford Jr. said Thursday that his company will hold off on health care talks with the union until after the GM deal is ratified.

"It is fair to say that the UAW has never cut deals where they've left one company disadvantaged versus others," Bill Ford said in a conference call with analysts. "We are working on it, and we are doing it quietly."

The GM-UAW deal comes on the heels of the Oct. 8 bankruptcy filing of Delphi Corp., the largest U.S. auto-parts supplier. Delphi Chairman Robert S. "Steve" Miller has said he wants the company's UAW workers to take 60-percent wage cuts and reduction in health care benefits to bring their pay in line with workers in its overseas operations.

One auto industry analyst said the Delphi bankruptcy was a shock to the system for Detroit's Big Three.

"It seems like perceptions in Detroit have changed quite a bit, and people are nervous about GM's future," said Rod Lache of Deutsche Bank. "This health care deal doesn't solve GM's problems, but it's a very good step."

UAW analyzed GM first

Gettelfinger said the UAW made an in-depth analysis of GM's financial condition before agreeing to the health care cuts. However, he warned that the strength of the union has hardly been diminished by the financial woes of GM and Delphi.

"We hear that every Labor Day, that they're going to be dancing on the grave of organized labor," he said. "Organized labor is the voice of working people in this country. We are still proud and very much alive."

The GM-UAW health care deal created an independent Voluntary Employee Benefit Association to mitigate the impact of GM's reductions in coverage for hourly retirees. The automaker has pledged to contribute $1 billion to the benefit association in 2006 and a similar amount in 2007 and 2011.

So while an individual retiree will make a monthly contribution of $10 to their health care plan, the VEBA will contribute an additional $40.

While the agreement would be a big change for the UAW's retirees and hourly workers, who have long enjoyed some of the best benefits in the world, the premiums still pale in comparison to the U.S. average, according to a recent study by the Kaiser Family Foundation.

A single worker contributes $610 and families contribute $2,713 annually in premiums for coverage in the average U.S. employer-sponsored health care plan, the study said. By comparison, single UAW retirees would pay premiums of $120 and families would pay $252 annually under the agreement.

The agreement also made modest increases in the cost of mail-order prescription drugs, and increased the co-payments for erectile dysfunction drugs such as Viagra from $10 to $15 at the retail level.

Mixed reaction by retirees

Retirees took in details of the deal Thursday, reacting with a mix of exasperation over the increased costs and relief that the hike wasn't worse.

"It sounds pretty good," said Henry Hoisington, an 87-year-old retiree from Lansing who worked 33 years at GM. "I'm going to be able to handle it."

Hoisington, who is retiree chairman for Local 652 in Lansing, said many retirees won't be happy with the deal.

"I figure they're not going to accept it too well," he said. "They're mad at the company already. This seems like they're taking away more from the retirees than the active workers."

Earl Washington, who worked nearly 30 years at GM in Flint, thought the UAW gave up too much.

"They are breaching a contract they already agreed on," he said. "The union should not have agreed to those changes. It's not the best deal they could have had."

The next step in the agreement is for local UAW leaders to take the deal to their rank-and-file members for a vote.

One local president said most UAW officials "gave a sigh of relief" that the deal was in place.

"I don't think we could have done any better," said Jim Kaster, president of Local 1714 in Lordstown, Ohio. "Just take a look at what happened to Delphi and that tells you how bad it could be."

Art Luna, president of UAW Local 602 in Lansing, said he was disappointed the union couldn't do more for its retirees but he supported the agreement.

"We don't just have an obligation to the workers, we have an obligation to the communities we live in," Luna said. "The auto industry is very competitive and sometimes we have to do things to help the company along because we as a labor union cannot be successful if the company isn't successful."

But Luna said U.S. autoworkers also need government help.

"All this is a Band-Aid," he said. "If they really want to resolve the health care issues, they can't negotiate over the bargaining table, it has to be done in Washington, D.C."

You can reach Bill Vlasic at (313) 222-2152 or bvlasic@detnews.com. Detroit News wire services contributed to this report.