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Autoworkers, GM Agree to Health Care Trust, Other Benefits

September 26, 2007 at 4:50 PM EDT
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GWEN IFILL: The tentative agreement was reached early this morning. It includes a key element which transfers control of health care costs from General Motors to the union. Here to discuss what we know about it and other provisions of the deal is Micheline Maynard, Detroit bureau chief for the New York Times. She joins us tonight from New York.

Welcome, Micheline.

MICHELINE MAYNARD, The New York Times: Thank you, Gwen.

GWEN IFILL: Is it fair to say that this strike is what broke what had turned into an impasse?

MICHELINE MAYNARD: There was something of a logjam. I think the UAW and GM had agreed on the essence of the contract, which was a health care trust, but there were some details to be worked out. The union got a little bit frustrated with the lack of progress, and they decided to send workers out for a couple of days.

GWEN IFILL: Assuming for a moment — I’m going to just give you credit for not knowing everything that’s in the contract yet, because it’s still being presented to workers. But just based on your reporting, what you know so far, tell us about this health care trust fund, $51 billion I guess off of GM’s books?

MICHELINE MAYNARD: Right, what this is, is called is a VEBA, or Voluntary Employee Benefit Association. And what happens is this obligation will be taken off GM’s books. It will be transferred to an independent trust, which will then administer health care benefits. The union will probably take a role in administering it, but there will be independent advisers who will decide what kind of benefits the UAW members will get.

Lifting the health care burden

GWEN IFILL: Every time we've talked about this before, we've talked about what a great burden it was on the industry to have to pay for these health care costs, especially the legacy costs of retirees. Does this now lift that burden?

MICHELINE MAYNARD: Well, it lifts it partially. The Detroit carmakers will still be liable for pension costs for their workers, but the pensions are more or less funded. What has been a big expense to them every year has been these health care benefits. At General Motors alone, the outlay for health care is in the billions of dollars, $3 billion or $4 billion.

GWEN IFILL: So this is a huge shift in responsibility. Why would the unions -- what do they say about why they would want to take it on?

MICHELINE MAYNARD: Well, there's a key point in this. When you form one of these trust funds, it's protected in case one of the companies goes bankrupt. And I actually used to cover the airline industry, and retiree health care for the airlines is by and large a thing of the past, because once you terminate labor contracts in bankruptcy, you don't have to provide benefits like this.

This is one of the most important benefits to the UAW, and it always has been. So UAW leaders decided it was time to participate in one of these trusts.

Two-tier pay scale

GWEN IFILL: Something else that the union agreed to was to allow the company to impose something of a two-tier pay scale for new hires. Why?

MICHELINE MAYNARD: Well, the UAW earns about $28 an hour just -- $29 an hour in straight pay, but the cost of their benefits adds $40 to $50 more onto that. What we're talking about here, though, is the base pay.

And what's happened at the non-union companies, like Toyota and Honda, is that they've pegged their wage rates to what's going on in their local communities. So, for example, in Kentucky, where Toyota has a big plant, they pay about $25 an hour because there's a General Motors and a Ford plant down the road. But in San Antonio, Texas, where there's no car plant for miles, they're paying about $14 an hour.

And faced with that, General Motors decided that it wanted to push the union for this two-tier approach. Now, this only takes effect in the case of people who are newly hired to GM. And given the auto industry's problems, it may be a while before new workers are hired.

GWEN IFILL: But there are temporary workers which this is going to allow GM to hire.

MICHELINE MAYNARD: Well, the auto companies have been allowed to hire temporary workers for just that, for temporary assignments, but what happens at the Japanese plants is you could be hired as a temporary worker and last for years without getting a full-time job. So this gives the company a little bit more flexibility in the use of temporary workers.

Joining the new wave in benefits

GWEN IFILL: Does this contract, what we know of it, begin to signal the death knell for old-fashioned pensions, defined pension benefits, and a shift maybe to something like 401(k)s, which we see so many other places in the business world?

MICHELINE MAYNARD: You know, in a sense, the Detroit companies and General Motors in particular are joining a wave that's already taking place in the rest of industry. The kind of pensions and health care that General Motors has, that Ford and Chrysler have, are very unusual now in the modern-day industry. And so, in a sense, they've just joined everyone else.

GWEN IFILL: One of the things that's also interesting, and from what we've heard about this, is that there's not a pay increase attached to this deal, is there?

MICHELINE MAYNARD: No, what the union has been able to negotiate over the last few years is what's called lump sum payments, so they're not folded into hourly wages. They used to get one raise and then a couple of lump sum payments, but in this contract, apparently, there is no wage increase at all. There will just be sort of what they call a signing bonus.

Maintaining plants, jobs

GWEN IFILL: Is there any that we know of, any agreement to keep plants open? That seems to be one of the major concerns that unions have had over the past several years, that their jobs are simply going to go away?

MICHELINE MAYNARD: Those details are still pretty fuzzy. The union claims that the number of jobs at General Motors now, which is about 73,000 people, will be the same at the end of the contract or maybe a little higher. That would be in 2011.

General Motors, on the other hand, says that the contract makes them competitive. And while they're going to make investments in America, they said they really didn't give us any details specifically on where.

GWEN IFILL: When we find out the details, do we know whether this sort of an agreement is going to provide a blueprint for the future negotiations with Ford and Chrysler, the other two parts of the big three?

MICHELINE MAYNARD: Well, it generally does. They have what's called pattern bargaining in Detroit. And in the case of Ford and Chrysler, they both would like one of these health care trusts. Ford has about a $25 billion liability, and at Chrysler it's about an $18 billion liability. When you lift that burden, your cost of borrowing goes down. And, in fact, Standard and Poor said today that it would consider upgrades for the debt of all three of the companies.

GWEN IFILL: Micheline Maynard of the New York Times, thank you very much.

MICHELINE MAYNARD: My pleasure.