Talks Should Not Focus On Retiree Health Care Costs

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Retiree Health Care Costs


Contract negotiations between United Auto Workersand the Big Three automakers should focus on manufacturing costs,rather than retiree health care obligations, according to the union,the AP/Tennessean reports (Krisher, AP/Tennessean, 8/6). UAW last month began contract negotiations with General Motors, Ford Motor and the Chrysler Group. UAW contracts with the automakers will expire on Sept. 14.

Theautomakers, which have an estimated $90.5 billion in unfunded retireehealth care obligations, have considered an agreement reached late lastyear between Goodyear Tire & Rubber and the United Steelworkers of America.Under the agreement, Goodyear transferred retiree health careobligations to an independent trust fund, or voluntary employeebeneficiary association, that the union will manage. In exchange,Goodyear established a $1 billion fund to pay health care costs andagreed to invest at least $550 million in manufacturing facilitiesrepresented by the union. Goodyear agreed to fund 83% of total retireehealth care obligations, but the automakers likely will seek to fund50% to 60% of total obligations (Kaiser Daily Health Policy Report, 7/25).

Theautomakers have said that they need to reduce retiree health careobligations and other costs to become more competitive with foreigncompanies. Laurie Harbour-Felax -- managing director at Stout Risius Ross,a financial and strategic advisory company -- said that the automakerspay $1,200 to $1,500 per car for health care costs, much more thanforeign companies pay. However, according to materials provided by UAW,the "vast majority of the costs of producing a vehicle and transportingit to a dealership and preparing it for sale -- including design,engineering, marketing, raw materials, executive compensation and othercosts -- are not related to direct or indirect manufacturing labor"(Krisher, AP/Tennessean, 8/6).

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