Kaiser Daily Health Policy Report

Monday, October 29, 2007

Health Care Marketplace

      United Auto Workers officials on Saturday said that Chrysler Group employees represented by the union approved a four-year contract that will establish a voluntary employees' beneficiary association, the Detroit Free Press reports (Higgins, Detroit Free Press, 10/28). Under the contract, Chrysler will contribute $8.8 billion to a VEBA managed by UAW, a move that would shift retiree health care liabilities from the company to the association. Chrysler will pay about $1.5 billion in 2008 and 2009 for retiree health care liabilities before the VEBA assumes them in 2010. The contract also will establish a two-tier wage system similar to the one established at General Motors. Some UAW members at Chrysler reportedly opposed the new wage system and the lack of production guarantees at U.S. manufacturing facilities (Kaiser Daily Health Policy Report, 10/26).

UAW members at Chrysler approved the contract with the support of 56% of production employees, 51% of skilled-trade workers, 94% of clerical employees and 79% of engineering workers, union officials said in a statement (Detroit Free Press, 10/28). According to USA Today, the contract will "help maintain [the] standard of living" for UAW members at Chrysler but will reduce their level of health insurance, limit their physician visits and increase their copayments (Silke Carty, USA Today, 10/29).

Ford Contract Negotiations Continue
UAW on Saturday began final negotiations with Ford Motor on a similar contract, the AP/Boston Herald reports (AP/Boston Herald, 10/28). According to individuals familiar with the negotiations, although UAW President Ron Gettelfinger did not attend, he has followed the discussions closely (Aguilar, Detroit News, 10/27). Gettelfinger said that the Ford contract likely would follow a similar pattern as the GM and Chrysler contracts. He added that Ford likely will seek more concessions because of the weaker financial condition of the company in comparison with GM and Chrysler. "It is unclear how difficult negotiations with Ford will be," the Wall Street Journal reports (Boudette et al., Wall Street Journal, 10/29).

UAW and Ford have reached a "broad agreement" on much of the contract, but "gaps remain on key issues," the News reports. For example, Ford seeks a larger discount on VEBA contributions than GM and Chrysler received, according to individuals familiar with the negotiations (Hoffman, Detroit News, 10/27).

David Gregory, a labor law professor at St. John's University, said that the contract would follow the "essence of the pattern" but added that "there's going to have to be more flexibility because of Ford's predicament." He said that Ford "may have to make extravagant promises that it really can't fulfill" (Maynard, New York Times, 10/28).