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A retiree healthcare deal astir in Detroit
Detroit automakers, hit with huge losses, may spin responsibility off to the labor union during contract talks this summer.
from the May 29, 2007 edition
Page 2 of 4
The arrangement, known as a "voluntary employee beneficiary association" (VEBA), is not a new idea. A number of state governments use so-called VEBA trusts to provide benefits for current workers such as teachers, for example. Ford and General Motors already use VEBAs for some retiree health costs.
But the idea of turning to a VEBA as an escape hatch for a full-scale retiree health plan is still novel.
In 2006, a major supplier to the auto industry, Goodyear Tire & Rubber Co., reached such an accord with the United Steelworkers.
Goodyear agreed to put $1 billion into the trust. The amount falls a bit short of the estimated liability. But it's enough that the union saw a fighting chance that the new trust will be able to provide for the beneficiaries.
The steel union doesn't directly control the trust fund, but it plays a guiding role through the appointment of trustees.
"We needed to get a billion dollars for this to be feasible at all," says Wayne Ranick, a spokesman for the United Steelworkers International in Pittsburgh.
That same kind of arithmetic will be at work when the Big Three bargain with the UAW this summer and beyond.
Workers will want to find a balance between preserving benefits and preserving jobs, striking a deal that allows for a healthy company to move forward.
At Goodyear, Mr. Ranick says a key element of the deal was a measure of job security. The tiremaker pledged to invest $550 million in plants and to operate them at a certain manpower level.
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