Employee costs dumped on UAW

The auto industry, including the parts sector, has decided to dump health care coverage on the unions. The July 6 agreement between the Dana Corporation, a major worldwide producer of axles and other vital parts, has begun the process, which presents a danger and a challenge to the organized labor movement.

Central to the proposed settlement, through which Dana hopes to emerge from Chapter 11 bankruptcy by year’s end, is the establishment of a Voluntary Employee Beneficiary Association (VEBA), which will be controlled and administered by the union.

For decades autoworkers have engaged in collective bargaining over not only wages but a wide range of benefits from pensions and health care coverage to vacations, holidays and income security during layoffs. It is generally understood that benefits are a form of deferred wages - compensation different in form but not in essence.

Because health care is so important for workers and their families, the UAW has over the years made wage concessions—deferrals—to offset rising medical costs and maintain the level of coverage members are accustomed to. Most recently workers at Ford and GM agreed to forgo a dollar an hour in previously negotiated annual raises and cost-of-living-allowance (COLA) increases.

Since 1964, in all but two contracts, the union agreed to divert part of the COLA and apply it to health coverage. With all of the horse trading that has gone on in negotiations over the years, it’s been with a mutual understanding that employers were responsible for insuring employees to shield them from prohibitive medical costs. At what cost? The concessions have led to the overall downsizing of the living standards of auto workers.
What is a VEBA?

VEBA is a trust established to fund workers’ and retirees’ benefits. A trust is a transfer of something of value to another party—in this case the UAW. VEBA will be responsible for the dispersing of funds for health care. The UAW will become the trustee of those funds giving the union control of the assets. The retirees and disabled will be the beneficiaries of those assets. They must be protected if the deal is consummated. Dana is contributing $700 million in cash and $80 million in stock in seed money to start up the VEBA.

While legal since 1928, VEBAs were relatively uncommon and became a topic of widespread discussion only with this year’s settlement of the Goodyear strike. Goodyear agreed to make an initial contribution of $1 billion to establish the fund, but the fund is to be run by the United Steel Workers and relieves the company of all future pension liabilities.

Dana is the first auto parts supplier to require its unions to take full responsibility for providing health care to retirees and disabled. Dana’s plan in creating a VEBA is to dump the rising health costs onto the union, which they believe will save them millions when they come out of bankruptcy in September. Dana plans to close eight North American plants and sell several manufacturing units if the deal goes through.

Centerbridge, a Wall Street private-equity firm and one that lost the bidding war over Chrysler, is paying Dana $500 million to acquire a 25-percent stake in ownership. The union must challenge this ownership of a private equity corporation. Herein lies the struggle over property rights and control.

The bosses are all too happy about the potential of VEBAs as long as the UAW bureaucracy blesses them. JP Morgan said that profits will rise if auto companies convert union retiree health care liability into a fund run by the UAW. (Detroit News, July 10). They believe that VEBA will force the UAW to impose health care cuts.

For the unions, the risks are tremendous, as the VEBA could become underfunded, forcing a union that is the administrator of the trust to make benefit cuts.

If the union remains passive on this critical issue, the squeals of joy in Detroit boardrooms and on Wall Street will be deafening. If the trend becomes widespread, this could put the health care of a half-million UAW workers at the mercy of huge debt to cover the rising costs. The Big Three, bankers, private equity companies and the medical-industrial complex will be the big winners. Collective bargaining between the Big Three and the UAW begins next week when Ford and Chrysler meet with the union. GM follows a few days later. VEBA will be at the top of the agenda.

For the UAW to promote VEBAs is a form of class collaboration that is dangerous to the organized labor movement. However, the assets contained within the VEBA, combined with the value created by the decades of labor power of retirees and their deferred wages and benefits, can be translated into a form of property rights, an early stage of workers control. Through the VEBA the UAW should exercise its rights over Dana’s property as collateral for rising health care costs and an underfunded benefit.

It is time for the labor movement in defense of the UAW in the coming negotiations to mobilize the vast numbers of rank-and-file workers and retirees to protect health care and jobs—a property right—by any means necessary. The health care crisis is permeating all sectors of the workers and the oppressed nationalities, including community groups, immigrant rights organizations and the anti-war movement. Health care is a universal right and demands a universal and united response.


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