FacebookTwitterGoogle+RedditEmail

Auto Makers Push Health Care Trust Solution for Industry in Crisis

by CHRIS KUTALIK

A rising chorus of business gurus is singing the praises of a new solution to the U.S. auto industry’s ongoing crisis: one big health care trust for all the Big 3’s workers. According to the proposal’s cheerleaders, by making giant one-time pay-ins the Big 3 auto makers can slice off an estimated $116 billion worth of retiree health obligations from their balance sheets in one swoop and restore profitability.

What’s more, union members will gain too because the money and future administration of retiree health care will be placed in the hands of a massive UAW-administered trust, called a Voluntary Employees Beneficiary Association (VEBA).

A simple win-win for all, right?

“Wrong,” say a growing number of United Auto Workers members. UAW rank and filers, including members of the UAW rank-and-file group Soldiers of Solidarity, have launched a campaign to demand that all plans for such a solution be dropped in current contract negotiations.

In one campaign leaflet these workers say that VEBA really stands for “Vandalize Employee Benefits Again” and that the plan will allow “the company to walk away from retiree health care commitments, and shift all the risk.”

But what exactly is a VEBA?

On the surface, a VEBA is nothing more than a federally recognized non-profit 501(c) (9) corporation set up to insure that health care, pension, unemployment, or other benefits are routinely paid out to workers covered by the trust.

According to the non-profit monitoring service Guidestar, there are at least 2,700 VEBAs already in existence for union and non-union employees in industries ranging from steel to utilities to telecommunications. Indeed, several of them already exist (mostly to dole out unemployment money) for Big-3 companies or major auto part suppliers like Visteon, Delphi, Dana, and Johnson Controls.

VEBA RED FLAGS

On closer examination, however, red flags pop up for union members in several critical areas.

For one, many of the trusts start off under-funded. In fact, business analysts claim that this under-funding is one of the key advantages of a Big-3 VEBA solution. They point to the success of Goodyear Tires in dumping $1.3 billion of retiree health care obligations in favor of a $1 billion lump sum payment into a VEBA in the wake of the settlement of its grueling strike with the Steelworkers in late 2006.

Business analyst Mark Oline told Financial Week that General Motors may be only willing or able to offer less than $35 billion of the estimated $50 billion that it owes retired workers. Ford was estimated to only be able to put $13 billion of $17 billion, while Chrysler, with mounting financial pressures from its recent buyout by Cerberus, remained unknown in what it is expected to offer.

UAW members fear that under-funding could lead to a simple, grim arithmetic: each dollar shortchanged will presumably translate into a dollar that can’t be spent on health care premiums, co-pays, deductibles, or quality of care. Under a VEBA, the remaining costs of maintaining health care benefits will have to be shifted back to the workers themselves.

“VEBA shortchanges retirees on benefits they already earned because it is underfunded upfront,” said Gregg Shotwell, a member of UAW Local 2151. “Exchanging dimes for dollars does not make sense. Whatever the company stands to save, retirees stand to lose. Eventually, it will put the union in charge of demanding retirees pay more out of pocket to make up for the short fall.”

Skyrocketing health care costs or an economic downturn may make an under-funded Big-3 VEBA into even more of a loser for workers. “God help us if we go into a depression or recession,” former UAW President Douglas Fraser commented to The Washington Post, “and the value of the fund plummets and the UAW is sitting there with this huge liability.”

Moreover, that liability may be more than financial-it may also be political. By taking on the role of health care administrator, the union could be forced into a compromised position, having to potentially limit or cut benefits for the workers it represents.

REAL DANGERS

These pitfalls are not merely hypothetical. They have already occurred with disastrous results for workers inside the UAW.

Following the signing of a concessionary two-tiered contract in January 2005, workers at Caterpillar found themselves with a bankrupt VEBA. According to the Caterpillar VEBA’s 2005 tax filing, the fund paid out $1,350,131 while only having $1,345,186 left in contributions, leaving it owing $4,500.

Retired Caterpillar workers expecting to draw from the fund suffered from the shortfall. They were left to deal with dramatic increases in co-pays, premiums, and deductibles despite previous agreements to protect them.

“I knew I had paid for my lifetime health care coverage through the wage and benefit structure of all the previous contracts I worked under, but this agreement vetoed them all,” retired Caterpillar worker and former UAW Local 751 President Larry Solomon wrote in Labor Notes at the time. “My wife and I will be paying $118/month premiums in 2005, and these will increase each year to a projected $332 by 2010.”

Fed-up with the inaction of UAW International leadership, members filed a federal class-action lawsuit against Caterpillar in May 2007. According to Shotwell, the case is still pending in the courts and in a final twist “now Caterpillar is suing the UAW because they should have prevented retirees from suing the company.”

A similar case occurred again at Detroit Diesel. Set up in 1993 to fund retiree benefits, the joint company-and-UAW-administered fund was exhausted by 2004. Saddled with sudden out-of-pocket health care costs, three Detroit Diesel members turned to the courts in desperation, filing a class action suit in January 2007 in defense of the 1,126 affected retirees and surviving family members.

In certain cases, employers can even raid a VEBA’s funds after it has been set up to fund capital expenditures. In 2000, General Motors shifted $1 billion from a VEBA that covered members of the UAW and other unions, according to William Hanline, a member of UAW Local 2195 in Decatur, Alabama. GM spent $500 million of the $1 billion on investments in Suzuki plants and another $500 million to boost the profits of its financing arm, GMAC.

DROPPING VEBA

With these dangers in mind, anti-VEBA UAW members are hoping that they can put up enough resistance to force VEBA plans to be dropped. They plan on distributing flyers and lobbying fellow members at Labor Day parades, union picnics, and other events throughout Michigan.

They also plan on taking the fight beyond just a defensive one around stopping VEBA. Many members are advocating a more far-reaching solution to the auto industry’s health care crisis: a national single-payer health care system for all workers.

“The union is not a financial institution,” said Shotwell. “The union’s purpose is to advance social justice not manage the retreat from corporate accountability.”

[Tiffany Ten Eyck assisted with research for this article.]

CHRIS KUTALIK is an editor of Labor Notes in Detroit. He can be reached at: chris@labornotes.org

 

 

More articles by:

CounterPunch Magazine

minimag-edit

bernie-the-sandernistas-cover-344x550

zen economics

January 23, 2017
John Wight
Trump’s Inauguration: Hail Caesar!
Mark Schuller
So What am I Doing Here? Reflections on the Inauguration Day Protests
Patrick Cockburn
The Rise of Trump and Isis Have More in Common Than You Might Think
Binoy Kampmark
Ignored Ironies: Women, Protest and Donald Trump
Gregory Barrett
Flag, Cap and Screen: Hollywood’s Propaganda Machine
Gareth Porter
US Intervention in Syria? Not Under Trump
L. Ali Khan
Trump’s Holy War against Islam
Gary Leupp
An Al-Qaeda Attack in Mali:  Just Another Ripple of the Endless, Bogus “War on Terror”
Norman Pollack
America: Banana Republic? Far Worse
Bob Fitrakis - Harvey Wasserman
We Mourn, But We March!
Kim Nicolini
Trump Dump: One Woman March and Personal Shit as Political
William Hawes
We Are on Our Own Now
Martin Billheimer
Last Tango in Moscow
Colin Todhunter
Development and India: Why GM Mustard Really Matters
Mel Gurtov
Trump’s America—and Ours
David Mattson
Fog of Science II: Apples, Oranges and Grizzly Bear Numbers
Clancy Sigal
Who’s Up for This Long War?
Weekend Edition
January 20, 2017
Friday - Sunday
Paul Street
Divide and Rule: Class, Hate, and the 2016 Election
Andrew Levine
When Was America Great?
Jeffrey St. Clair
Roaming Charges: This Ain’t a Dream No More, It’s the Real Thing
Yoav Litvin
Making Israel Greater Again: Justice for Palestinians in the Age of Trump
Linda Pentz Gunter
Nuclear Fiddling While the Planet Burns
Ruth Fowler
Standing With Standing Rock: Of Pipelines and Protests
David Green
Why Trump Won: the 50 Percenters Have Spoken
Dave Lindorff
Imagining a Sanders Presidency Beginning on Jan. 20
Pete Dolack
Eight People Own as Much as Half the World
Roger Harris
Too Many People in the World: Names Named
Steve Horn
Under Tillerson, Exxon Maintained Ties with Saudi Arabia, Despite Dismal Human Rights Record
John Berger
The Nature of Mass Demonstrations
Stephen Zielinski
It’s the End of the World as We Know It
David Swanson
Six Things We Should Do Better As Everything Gets Worse
Alci Rengifo
Trump Rex: Ancient Rome’s Shadow Over the Oval Office
Brian Cloughley
What Money Can Buy: the Quiet British-Israeli Scandal
Mel Gurtov
Donald Trump’s Lies And Team Trump’s Headaches
Kent Paterson
Mexico’s Great Winter of Discontent
Norman Solomon
Trump, the Democrats and the Logan Act
David Macaray
Attention, Feminists
Yves Engler
Demanding More From Our Media
James A Haught
Religious Madness in Ulster
Dean Baker
The Economics of the Affordable Care Act
Patrick Bond
Tripping Up Trumpism Through Global Boycott Divestment Sanctions
Robert Fisk
How a Trump Presidency Could Have Been Avoided
Robert Fantina
Trump: What Changes and What Remains the Same
David Rosen
Globalization vs. Empire: Can Trump Contain the Growing Split?
Elliot Sperber
Dystopia
FacebookTwitterGoogle+RedditEmail