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As
part of a tentative contract with General Motors announced Sept. 26,
United Auto Workers President Ron Gettelfinger promised to give away
one of the union's most important benefits: company-paid health care
for retirees. The pact ended a two-day strike by 73,000 GM workers.
For
weeks GM and UAW officials had been negotiating the terms of a
Voluntary Employee Beneficiary Association (VEBA) trust, into which GM
would make a one-time donation and thus dump any future obligation to
retirees' health care. The soundness of the union-administered trust
would depend on an ever-shakier stock market.
Many
unions have made health-care givebacks in recent years in coverage
restrictions and higher co-pays, deductibles, and premiums. And many
employers, especially at non-union companies, have been eliminating
retirees' health benefits. But this happening at GM—with the
acquiescence of a union that once set the pace in health
benefits—represents a big step back for the whole working class and
threatens to accelerate the pace of attacks on this front.
This
assumes that the members approve the contract, which is not a given.
Fear of membership rejection, in fact, is why the union called a strike
at all. Talks continued after the contract expired Sept. 14. By Sept.
19, the press was reporting a fight over how much GM would contribute
to the trust. The next day, papers reported GM threats that if a VEBA
weren’t approved, it would demand a wage cut of at least $5 an hour,
higher co-pays for workers and retirees, pension cuts, and extensive
plant closings.
But
when Gettelfinger broke off talks and called the strike, he insisted
the issue was not the VEBA but rather job security. A Detroit News
report shows this was all just theater: "The deep cuts give the
UAW a glimpse of what could be in store if the VEBA gets tossed out ... it may help UAW leaders sell
reluctant members on a VEBA deal."
In
the same vein, industry analyst David Cole said: "The leadership
may need a walkout to show members it did all it could to get the best
deal."
This
continues a longstanding union practice. In his account of the 67-day
1970 UAW strike against GM, "The Company and the Union,"
William Serrin explained how the strike was largely put on for show,
with officials from both sides knowing in general terms beforehand what
the final agreement would look like. Long-time UAW leader Emil Mazey
told Serrin: "Strikes make ratification easier. If the bills pile
up, he may be more apt to settle."
The
1970 strike won 30-years-and-out retirement, and uncapped
cost-of-living allowances (COLA). But the decline since then of both
the economy and the union's strength made for a much briefer show this
year—with nothing to clap for.
Before
the strike, past executive board members Jerry Tucker, Warren Davis,
and Paul Schrade wrote an open letter warning that a VEBA would "undo decades of hard won
protections, paid for in large part by wage diversions, past
concessions, and increased worker productivity." After the agreement
was announced they urged a “no” vote. They noted the "growing push
for a national healthcare system in this country patterned after the
Canadian 'Medicare for All' system."
Opposition
group Soldiers of Solidarity also warned against VEBA and other
concessions, and also called on the union to organize for such a
single-payer system. SOS says VEBA really stands for "Vandalize
Employee Benefits Again."
Negotiations
were held behind closed doors, and at first local union heads and
members had only brief summaries (the full contract was later leaked to
dissidents). But even these made clear that the union had won neither
on health care nor jobs.
GM
agreed to pay into the VEBA 70% of the $51 billion it owes for retiree
health-care obligations. The money will come from cash, stock, and
diversion of part of the normal COLA increase. For the VEBA to remain
solvent, returns on funds invested must stay ahead of health-care
costs. But The Wall Street Journal predicted a VEBA would lead to
benefit reductions because it would not be designed to fully absorb medical-cost
inflation.
Even
former UAW President Douglas Fraser—the man who started the concessions
ball rolling with his giveaways to Chrysler in 1979—recognized the
dangers: "God help us if we go into a depression or recession, and
the value of the fund plummets and the UAW is
sitting
there with this huge liability."
Even
with a solvent fund, retirees will have to contribute higher premiums
and co-pays than now, which supposedly will be offset by payouts from
an "overfunded" pension plan. Gettelfinger admitted the VEBA
only provides benefits for retirees and those on the payroll as of
Sept. 14. New hires will receive only a set annual amount after they
retire.
The
Journal also predicted that money saved by dumping its health-care
burden "should help free the company to pursue [its] strategy of
accelerating growth outside the U.S." But Standard & Poor's
said GM credit ratings had been "driven down by more than just
health-care
liabilities."
The
Steelworkers agreed to a VEBA at Goodyear in 2006. A follow-up story by
The Wall Street Journal described a typical day of the union official
who spends much of his time telling members they're not covered for
particular services.
In
2005 the VEBA covering UAW retirees at Caterpillar went belly up as
health-care costs soared, and they were left with thousands of dollars
in out-of-pocket costs and reduced coverage. In addition, a 44 percent
wage cut and health-care premiums were imposed on new hires to make up
part of the shortfall.
There's
also no guarantee GM won't raid the cookie jar for other purposes. It
already did so in 2000 when it shifted $1 billion from a smaller VEBA
to invest in its Suzuki plants and to boost GMAC profits. What's more,
the Financial Times reports that the union could become GM's biggest
shareholder, with a 17% stake, by virtue of the stock component of the
$36 billion to be transferred. This is guaranteed incentive for already
pro-management union bureaucrats to push even more concessions to save
"our" company.
The
pact contains a $3000 signing bonus and annual lump-sum bonuses of 3%
or 4% for the final three years, but no wage increases. Jobs off the
assembly line (i.e. material handling, inspection, and many others)
have been relabeled "non-core" and will be filled with new
hires at wages half as low. Current workers in those jobs are expected
to be bought out or pushed out, as happened at GM spin-off Delphi
(eventually even senior workers there were forced to accept a $9 an
hour wage cut).
GM
will also save billions by giving new hires 401(k)s instead of defined
benefit pensions. Despite the rhetoric about striking for jobs, the
week after the contract was announced it was revealed that GM could
close four more plants than had been projected. And the contract allows
closure of even more if conditions arise "beyond the control of
the corporation," such as poor sales.
A
company representative told the Detroit News that job security in
remaining plants will "depend on whether local unions agree to
work-rule changes and use of non-union labor."
On
Sept. 14, GM stock jumped more than 13 % on a report that a VEBA
agreement was close. When the pact was announced, GM shares rose 9.4%,
and Ford's went up 6.5% in anticipation of a similar deal. Said a JP
Morgan analyst, "GM captured a much broader set of concessions
than we previously anticipated."
The
Wall Street Journal crowed that early-retirement packages and buyouts
will let GM "get rid of thousands of workers and replace many of
them, particularly those in non-production jobs, with new employees
earning far less. ... With yesterday's deal, the UAW
and
its biggest employer have conceded that their golden age of dominance
is over."
Industry
analysts are skeptical that these cost savings will make much
difference in its competition to regain market share from Asian and
European-owned producers. UAW dissidents have stressed that GM's
competitive woes are due more to poor quality, design, and product
choice than labor costs, and that in any case the union's business is
not to help it compete but to organize the unorganized.
Dissidents
point out the union could end up in a corruption scandal like the one
at the Union Labor Life Insurance Company, whose executives—all union
heads—lined their pockets from insider trading, and stymied proposals
to have the AFL-CIO endorse single-payer for fear it would jeopardize ULLICO's profits. Short
of such a scandal, bureaucrats already slow to organize will have their
focus further distracted by new income from administering the
trust. Even if members don't
reject the contract, the debacle could inspire debate on how to turn
around the politics and strategy of the union.
After
retiree benefits were eliminated at some steel companies, many United
Steel Workers members joined the single-payer movement in Ohio. Key to
getting the UAW as a whole involved in the fight for single-payer would
be a reversal of union policies and practices set way before the concessions wave that started in the
1980s.
The
most common explanation for the U.S. being the only industrialized
country to lack a national health-care program is the decision of
unions to bargain company by company for health benefits. This decision
was taken once social-democratic bureaucrats like the UAW's Walter
Reuther had consolidated power—a
process which included squelching calls for a labor party, which could
have fought for nationwide health, pension, and other social benefits.
If
Gettelfinger is able to have his way, UAW members will have tragic
proof of how wrong Reuther's decision was.
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