UAW would take over health care
May 16, 2007
Labor experts are voicing skepticism about an idea that would shift retiree health care costs from Detroit automakers into a new fund run by the UAW.
The plan is based on a so-called voluntary employee beneficiary association, or VEBA, such as Goodyear Tire & Rubber Co. worked out with the steelworkers union.
VEBAs are a decades-old concept in managing employee benefits, but recently have gained attention as a possible solution to the health care burden on businesses.
Under the concept, the Chrysler Group, General Motors Corp., and Ford Motor Co. would create a UAW-run fund with perhaps $55 billion to $65 billion, and then give all responsibility for retiree health care liabilities to the union.
The Wall Street Journal reported Tuesday that the automakers have been pushing in recent months to create such a plan with the UAW. The deal announced Monday for private-equity firm Cerberus Capital Management to buy Chrysler only increased speculation that such an arrangement might be in the offing.
Nelson Lichtenstein, a professor of labor history at the University of California, Santa Barbara, scoffed at the idea, saying runaway health care costs would bankrupt the plan.
"These are no solutions. These are just stopgap things. ... Eventually the inflation in health care costs will catch up with the resources in this entity," he said.
Gary Chaison, an industrial relations professor at Clark University in Worcester, Mass., agreed: "My view is that it's not a stroke of genius. It may in fact be a stroke of madness."
Harley Shaiken, professor and expert in labor studies at the University of California, Berkeley, said the talk about a VEBA-style plan doesn't necessarily mean one will emerge.
"I think it almost assuredly will be raised in the talks, but the UAW has been cool to it so far, for the obvious reason that it shifts the risk from the employer to the union and to the workforce," he said.
Such a plan could offer the union the advantage of labor peace and greater job security.
But Chaison said skeptical UAW members would rather tinker with current plans by increasing prescription co-pays and other changes.
"I think UAW workers would be very hesitant for any major modification to health care plans," he said.
Contact JOHN GALLAGHER at 313-222-5173 or gallagher@freepress.com.
Copyright © 2007 Detroit Free Press Inc.