Union contracts protect retiree benefits

At nonunion companies like Nissan,Toyota and Honda, management alone decides what’s “fair.” Not surprisingly, that almost always means workers pay more while the company contributes less.

Because workers have a voice, the outcome is very different at unionized companies like General Motors, Ford and Chrysler. Case in point: 2007 auto
negotiations, led by UAW members at all three companies. It took months of hard bargaining, two short strikes and the leverage that can only be applied by tens of thousands of workers acting together with a common purpose. The result is that UAW members brought home new contracts at GM, Ford and Chrysler which will reshape the domestic auto industry.

The new pacts secure wages and benefits for active and retired workers and will boost competitiveness at the three automakers. The agreements also include unprecedented product and investment commitments to build current and new vehicles in UAW-represented plants in the United States.

Retirees rally at the start of auto company negotiations. The new agreement protects retiree health benefits.

The new contracts also include one of the most transformational moves in the history of employer-worker relations: the creation of a unique system to protect health care benefits for retired workers, while at the same time achieving significant cost reduction for employers. Fairness here is determined by both parties, not by management alone.

By contrast, management is acting in an unfair manner, without worker input, at nonunion plants like Nissan’s auto factory in Canton, Miss. Nissan’s profits are going up, but management still wants to shift more health care costs to workers. That’s because workers there don’t have the power of standing together to protect themselves.

Making history to protect unionized workers and retirees. Retirees from unionized UAW auto plants will have their health benefits secured by a Voluntary Employee Beneficiary Association (VEBA). The VEBAs will be pre-funded by GM, Ford and Chrysler, with a combined total of more than $50 billion in cash and other assets – the largest transfer of resources, ever, from capital to labor. These funds can only be used to pay retiree health benefits and will remain solvent for 80 years, regardless of the financial condition of the companies.

Despite company demands for harsh takeaways, the new agreements also protect quality and affordable health care for active workers and their families.

“The company came into these talks looking to shred our contract to pieces,” says UAW Vice President Cal Rapson, who directs the UAW GM Department. “But you can’t tear apart a group that stands together the way UAW members do.” UAW members at GM were the first to reach a new agreement in September, setting a pattern for wages and benefits which was followed by negotiators at Chrysler and Ford.

‘We’re dealing with the realities of a highly competitive industry that does not operate on a level playing field,” said Rapson. “We’ve negotiated a realistic agreement that protects existing manufacturing jobs and also creates the possibility for future growth.” The agreements at all three companies deliver economic gains for current and future retirees. They include four lump-sum payments for current retirees and an increase in benefit formulas for future retirees, including the supplement paid to workers who can retire, regardless of age, after 30 years of service.

Domestic automakers in the United States wanted to shift more of the company’s benefits costs to workers. But UAW members stood together and defeated their strategy. The power of workers joining together as a group meant they had equal standing with the company, allowing workers a seat at the table when it was time to negotiate a health care plan with the company. Those negotiations resulted in a health care plan that was fair to everyone.

The grass isn’t always greener. Maintaining health care for active workers and guaranteeing lifetime health care for retirees – along with pension increases – is a sharp contrast to what happens to workers at nonunion companies where workers don’t have the opportunity to stand together. Management does everything possible to pit workers against each other with each person trying to fend for him or herself. At Nissan, for example, workers are finding that changes to their health care coverage will mean more out-of-pocket costs for them in 2008.

“It’s all part of asking those who use more to pay more, which is only fair,” according to the document, “Nissan North America Manufacturing Benefits Update 2008.” But that’s not fair. Fairness isn’t picking on the worker who is sick and needs insurance coverage.

Executives at GM, Chrysler and Ford also wanted to shift more health care costs to workers. But UAW members were able to fight off the company’s demands. Why? Because workers and the company sat down together to negotiate a health care plan that would be truly fair to everyone. There are no such guarantees or peace of mind for nonunion workers in U.S. auto plants – not even for the lucky few who hope to avoid on-the-job injuries long enough to collect retirement benefits from their nonunion employers.