UAW-GM Deal Highlights U.S. Health Care Problems
The recent contract talks between the United Auto Workers (UAW) and General Motors (GM) exemplify the problems with our current health care system and puts a spotlight on the difficulties involved in defending retiree health benefits. According to the Washington Post, the agreement signifies a major change in the management of worker benefits:
At the core of the new deal is the transfer of retiree health-care payments from GM to the UAW. GM will pay an estimated $35 billion into a trust designed to appreciate in value and pay health-care benefits for retired workers for at least the next 80 years, the union estimated. In return, GM is able to unload a $51 billion burden in retiree health-care obligations from its books, enabling the troubled company to borrow money more easily and move more nimbly against competitors. GM's health-care liability is more than twice the company's $21 billion market capitalization.
UAW President Ron Gettelfinger said he is firmly convinced that the new approach is in the best interest of the union's membership. The new trust, funded by GM initially, will be managed by the union and will be used to pay retiree health benefits. Now UAW is working to get agreements, patterned after the agreement with GM, with Chrysler LLC and Ford Motor Co.
But is the UAW-GM deal really a good model for future negotiations? Although workers got better job security through GM pledges to undertake new projects in the U.S., the agreements allows GM to shirk its future health care obligations for retirees by transferring the benefits to a union-managed trust. Moreover, the UAW won't be able to negotiate benefits for future retirees. The fact that this deal was necessary shows just how troubled our nation's health and retirement benefits system is.
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