Forbes Flint: GM-UAW VEBA "Quackery"

This Forbes column by Jerry Flint was published on September 24 -- before the General Motors (GM/NYSE) and UAW agreement was reached. Meaning it may be dated. But I've just read it and want to post it because Flint's auto industry observations are always worth considering. And in this case, he observes that the idea of a health care trust is a "gimmick."

He ends this piece with this:

A health care trust, if it happens, may look good today, but one day it will come back to haunt GM. Just like the deal. You remember that one: It was so clever of GM to extract itself from its obligations to Fiat that you overlooked the $2 billion price tag. That $2 billion was the money that launched the Fiat turnaround.

It will be interesting to see what Flint writes now that the deal has been struck.

Comments

[Fire Gettelfinger]

“NO” ON VEBA AND “FIRE” GETTELFINGER!

Mr. Gettelfinger is no labor leader.
His VEBA attack on retirees needs to be defeated and Gettelfinger needs to be removed from office. The damage he has already done to the UAW is irreparable.
By attacking retirees and the historic gains of the UAW Mr. Gettelfinger is using his power and influence to destroy the UAW from the top down. He apparently doesn’t understand how the corporations are using him.
Mr. Gettelfinger spent too many years going to college and simply doesn’t understand the difficulties of being a worker or struggling retiree. Ever since his becoming president workers and retirees have suffered from his misguided horrific concessions.
Never before in the history of the UAW have past top retired UAW officials come out against a residing UAW president. This, however, is precisely what is now happening all around the nation….
Issued September 26, 2007 by Former UAW International Executive Board Members: Paul Schrade - Warren Davis - Jerry Tucker

We regret the decision by the UAW negotiators to tentatively agree to place the future health care protection of hundreds of thousands of UAW retired members under a union run Voluntary Employee Beneficiary Association, or VEBA. We believe it irresponsible by the parties to this negotiation to shift the burden of risk to the retired workers and their families and release General Motors from its commitment to the full and perpetual coverage of healthcare for the workers who built the wealth of the corporation in the first place.

We have previously noted the lack of any real discussion or debate among the members and secondary leadership of the union prior to the negotiations on the VEBA. Springing a new and potentially hazardous economic concept on an unsuspecting membership, either active or retired, is alien to the democratic principles in our governing constitution.

That a VEBA can be dangerous is well documented. UAW retired members covered by a VEBA at Caterpillar can painfully vouch for that. Their VEBA went bust and they now have thousands of dollars in unanticipated out-of-pocket costs per year for reduced health care protection.

In a recent letter to International President Gettelfinger, a prominent Detroit area local union’s leaders stated: “Most VEBA’s allow the companies to wash their hands of retiree health care. If things don’t go according to ‘plan’, it will be our own union telling retirees to drain their life savings to pay for medical care. That’s unacceptable because it goes against everything our union stands for.” And even former UAW President Douglas Fraser expressed his reservations about a VEBA when he said; “God help us if we get into a depression or recession and the value of the fund plummets and the UAW is sitting there with this huge liability.”

The Big 3 clamor to relieve themselves of the cost of retiree health care may be applauded by Wall Street and the investor class, but unions have a different responsibility and a different constituency. By going the VEBA route the parties will have missed a historic opportunity to inject their significant political clout in the growing push for a national health care system in this country patterned after the Canadian ‘Medicare for All’ system. That’s a system that each company acknowledges has leveled the competitiveness playing field for them there.

>From the start, this round of negotiations was projected by the media to be about what autoworkers could do—meaning give up—to help the domestic auto manufacturers out of the ‘competitiveness’ hole they’d dug themselves into. Yet GM showed a profit last quarter of $891 million as reported July 31, 2007 in Market Watch and their stock is soaring. There are a number of worker concessions in the tentative agreement which unfairly penalize workers and their families for management’s design failures.

We respectfully recommend that the GM UAW membership vote ‘NO’ and that the leadership instruct the workers to remain at work while they rejoin the negotiations to correct the VEBA mistake and other unjust concessions currently in the tentative agreement.

Fraternally,

Former UAW Directors:
Paul Schrade Region 6
Warren Davis Region 2
Jerry Tucker Region 5

Pass on the following links to UAW members and their families...
http://michaelwestfall.tripod.com/id107.html
http://michaelwestfall.tripod.com/id110.html
http://michaelwestfall.tripod.com/id16.html http://michaelwestfall.tripod.com/id6.html

[Sivaram Velauthapillai]

FireGettelfinger,

Not that I think you are going to respond to this but...

Don't you think that GM is facing huge problems that need concessions from the union? The hard won deals of the past are untenable and will all mean nothing if GM goes bankrupt. For instance, hardly any other company (just speaking in general and not just about the auto companies) pay healthcare like the present GM does.

You say that the healthcare fund can go bankrupt but so can GM. If GM goes bankrupt, you end up with nothing.

[John]

Paul, Warren & Jerry: I think you should consider Sivaram's points.