• May 31st 2007 at 5:32PM
  • 19
As many of you know (and have commented prolifically on), the Big 3 carry an enormous burden that import competitors like Honda and Toyota don't: unionized retiree health care costs. GM, for example, had $81 billion in salaried and hourly retiree health care obligations at the end of 2005. Chrysler is on the hook for $19 billion. That's no small amount when you're trying to turn a company around -- or in this case, three companies. In fact, the term used for it is indicative of just how health care is regarded: "liability."

The UAW will be negotiating a new labor contract agreement this summer, and one of the far-reaching ideas being considered is for the UAW to take over responsibility for health care liabilities. The Big Three would pay a huge lump sum (many billions), but afterward their obligation would be capped at some agreed-upon and competitive number. Tony Faria, an industry expert, said "The unions fully realize these companies are in trouble. The auto companies would provide some major amount of funding. From there on, they'd be paying at a known rate, rather than an ever escalating rate."

The setup is called a "voluntary employee beneficiary association," and there are models for it. Goodyear set one up last year in an agreement with the United Steelworkers, and GM already uses VEBAs for some of its retiree costs. It isn't a done deal, but it is something being considered. The UAW understands how serious the situation is, and could be prepared to do the previously unthinkable in order to gain other guarantees and create a better competitive climate for the domestic makers.

[Source: Christian Science Monitor]

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    • 1 Second Ago
      • 8 Years Ago

      I've spent a lot of time in our military, and lost friends to combat, accidents and duty-related suicides so I'm as patriotic as it gets. I believe in a fundamental American ideal: It is not good to subsidize mediocrity.

      Frankly you're not doing anyone any favors by buying something that doesn't meet your own personal standards or your needs.

      If I see an excellent product from the Big 3, I will certainly consider it if it meets my needs. If it doesn't meet my needs and isn't the best I can get for my dollar, I walk past it without a second glance.

      Lithous, you lack something fundamental in the understanding of history:

      We beat the Germans MAINLY because we stayed off the ground of the European theater until 1944. In the meantime the Russians killed nearly 80% of all of the German troops killed in WWII. The Atlantic ocean protected our production infrastructure from enemy attack.

      We beat the Japanese for the simple reason that Japan is an island nation with a limited population. We choked off her supply routes with submarines, and burned the cities (and the populations in them) to the ground with incidiary bombs

      ... Don't talk out your ass man.
        • 8 Years Ago
        Screw you,

        I have a very good grasp the impact American production capacity had on the war, but don't fool yourself into thinking that was the only factor. Shrewd politics, timing, organizational excellence, scientific openness, training and a geographically isolated population and production base all had significant impacts on our ability to beat our foes in WWII, not just GM's ability to pump out M4 tanks or TBM Avengers.

        • 8 Years Ago

        It was a figurative statement about how our industry didn't build overly complicated tanks like the Germans or easily shot through planes like the Japanese. We always have made middle ground to high quality products and made them in quanties that others would have had quality problems trying to produce. There is no way on God's green earth that Toyota could have made as many vehicles as GM in the 1970's with any hope of quality. Period. It is extremely recently, after all the global exchange of technology that they can do it now.

        BTW, please keep thinking U.S. industry, which supplied not just our own military, had little effect on the war.
      • 8 Years Ago
      I am in Canada where healthcare is paid by the government. Of course, we see tons of abuses , the first one caused by a lack of deductible to be paid by the patients. As for GM employees for ex, it is a known fact that many employees were buying Viagra (.35C deductible) only to resell it on the black market! GM is the largest Viagra buyer in USA. This is abuse.

      The US corporation are often accused of having given too much to the UAW. We have to keep in mind that this whole thing started with Ford in the 50's and kept on inflating. The US government wanted to break GM in the 60-70 oeriod because of monopolistic threat. Of course, the unions took advantage of it. The alternative was a costly strike.

      Toyota has over forty% market share in Japan, and do not have this problem because of 3 major differences:

      - Japan has been working diligently like ants to rebuild their country after the 39-45 war. They have a very diligent work ethic.

      - Japan has a National healthcare system

      - The asian philosophy , in general, has more respect for a work well done and attention to details. I have 3 Asian neighbours and the common denominators are:

      - They are very respectful and good neighbours

      - Their yards are impeccable

      - They are a very patient nation . A nice japanese garden could take many hundred years to mature.

      UAW will cooperate in my view. They are not stupid. The healthcare for the retirees will stabilize because of demographic reality: a lot of retirees from the 80's (so they worked in the golden age of the big three , from 1955 to 1985 ) will be in their eighties by 2010. They will join their solidarity brothers at the eternal garage....
        • 8 Years Ago
        I think its time to tell the retirees that its time to join the rest of American retirees and help pay some of the cost like 50%, all of you UAW guys have been riding the good years of free this and free that, and building shit cars with shit designs.

        Then you bitch because Americans are not loyal to the big 3 brands. There are only a few big 3 cars I would consider, Ford 500 Taurus X , Impala, sky, Chrysler mini van.

        Too many of you stand behind the UAW and would never make it in the real world where you work your ass off and hope wall street does not tell the CEO that they need to cut cost so the stock price can go up or you get an ass hole manager who wants to make a name for themselves, or you turn 50 and that next day you get a pink slip. Now you have no health care and you are back out on the street looking for work again and hoping that you can get the same pay and benefits you had before.

        Do you really know how many Americans have to pay a big share of their health care cost? I am sure its around 80% Do you know how many have pay into a 401k retirement system and hope they have enough put away to retiree when they turn 62 -65 ? Again I am sure its around 80%

        So someone please tell me do you also retire and get SS & Medicare? What a deal!!!

        The big 3 management and the UAW need to each share 50% of your current problems.
      • 8 Years Ago
      Be Oh Be, your conspiracy theory surrounding the Big 3 inflating HC costs in an attempt to force a VEBA on the UAW is absurd. Not only would the UAW come down hard on the Big 3 if your idea were true, but so would Wall Street. Imagine the two powerhouses dropping the hammer on the Big 3? It would be far worse than the current circumstance. Plus, we have laws forbiding it. So I highly doubt Rick Wagoner and Allan Mullaly want to join the likes of Jeff Skilling, and Dennis Kozlowski in prison.
      • 8 Years Ago
      This argument is moot unless some decent product comes out of the Big Three. The signs are hopeful, but Rome was not built in a day.
      • 8 Years Ago
      If GM is able to get away from this albatross maybe they can further their great new products. That is a whole lot of money they can spend on product development and marketing.
      • 8 Years Ago
      UAW has a very cheesy logo
      • 8 Years Ago
      It would be truly visionary on the UAW's part if they agreed to a VEBA.
      • 8 Years Ago
      I guess it would theoretically be easier for the UAW to control costs incurred themselves as opposed to having GM management do it so in a way it would make sense. Somehow I wonder if the retirees won't be getting the short end of the stick in this deal though.
      • 8 Years Ago


      Two definitive links that spell out the dilemma of autoworkers for the 2007 auto contract are at …



      Submission...Pass these links on
      • 8 Years Ago
      The Big-3 kept Wall Street happy by inflating profits and deferring costs. When the unions demanded large pay increases the companies instead increased pensions and retiree health benefits knowing the bill would not come due for decades. Now the piper has to be paid.
        • 8 Years Ago

        What's funny is nobody really argues the potential for just the opposite: that the Big 3 are actually inflating costs and reporting losses to essentially get the UAW to pay for their health care. Not saying they do it, but it wouldn't surprise me.
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