Short term, the tentative agreement between the United Auto Workers and General Motors Corp. is important because it ends a strike, the first against GM in 37 years. Long term, it may be most important for the shift of the massive $51 billion responsibility for retirees’ health care from the company to the union. Of the deal on retiree benefits, one 31-year GM employee said, "If it’s managed right, it will be OK." That could be a big "if." Meanwhile, other companies carrying big retiree benefits burdens have to be buzzing today with "what ifs."
Posted by Rhonda Holman
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47 Comments
Republics can’t be happy with this one.
LOL
Let’s see, universal health care in the US, or a resurgence in union political power?
Either way, I believe they get a Renaissance they’d prefer to avoid at all costs.
LOL
Yeah and the UAW dinosaurs got theirs while screwing all the new workers.
“GM and the UAW confirmed that the deal creates a GM-funded, UAW-run trust to administer retiree health care. The two sides gave no other details, but a person briefed on the contract told The Associated Press that it also would give workers bonuses and lump-sum payments and would pay newly hired workers at lower rates. The person requested anonymity because the contract talks are private.”
American companies can be more competitive if we had universal health care. But no, that would mean we could keep jobs in America rather than outsource them so Republicans will be against that idea. As usual we’ll have to rely on the Democrats to keep America’s manufacturing base strong while the Republicans are more interested in the economies of Mexico and China.
Don’t forget Iraq, Doug!
GM stock is up about 5%. The market likes the deal.
Hell yes, outlander; this shifts a major liability off the corporate books.
Methinks the union was backed into a corner on this one. I’m speculating, but having some familiarity with such negotiations, I bet the company said they’d die on the barricades to dump retiree health benefits. I further bet the union either had to eat that deal, or agree to take responsibility for the fund if the company provides the dollars.
This is not all that dissimilar to the 1986 CWA, IBEW and AT&T bargaining agreement when the unions wanted job security and the company could see the competitiveness handwriting on the wall, and could make no guarantees.
The compromise was for the company to fund a $20,000,000 employee training and retraining and placement group run by a joint labor/management team and funded by the company.
And new hires at lower pay USED to be a big issue with the unions. But given how they’ve been neutered by republican administrations over the years, they have to worry about SURVIVAL things, not two-tiered pay systems.
And health care is a survival issue. Thankfully, they didnt poop on their retirees. A Hobson’s Choice if there ever was one.
And, BTW, it was UAW and Michigan State JTPA people who set up the AT&T program in 1987. This agreement could have been predicted.
“this shifts a major liability off the corporate books”
Sorry I’m not up on the details here VT, but since GM is providing the funding, does it shift liability because it is now a defined contribution as opposed to a defined benefit?
Yep, kfg, that’s how I read it. Should have used “contingent” before “liability” to be clear, but the shift of a fixed $$ amount, some of which has no doubt already been funded, clears the possibility of an ever-increasing liability from the books. Of course, the two-tiered compensation system doesn’t hurt stock price either.
Well, and just the fact that they are back to work. They couldnt have survived a work stop for very long.
I don’t know why anyone is rejoicing at this announcement. Certainly the union should not be. A quick search will reveal union historical problems handling pension plans for companies.Of course, the kicker will be: Hillary gives free healthcare the money in this fund will be a wonderful bonus for some union stewarts.
Reading the article linked in the header, it appears that GM’s liability will be the transfer of $36 billion to a VEBA to be managed by the Union; thus, a projected $51 billion liability “settled” for $36 billion.
So, a $15 loss for the Union?
Wow, we need to unionize every company!
So, a $15 BILLION loss for the Union?
(Dang non-union typists)
Nah, Scab, the delta is to be made up by wise investments by those in charge of the VEBA.
And I’m sure every penny will be accounted for properly!
I bet they put in the stock market.
No, sorry it doesn’t set a precedent. And it turned out bad.Caterpillar set a fund up in 1998 and it went belly up in 2005.
http://www.bcbs.com/news/national/retiree-health-tab-could-fall-on-uaw.html
A VEBA fund set up in 1998 for UAW retirees at Caterpillar Inc. ran dry in 2005, forcing the retirees to pay more of their expenses. Retired workers sued the company in May, charging that they and their spouses are entitled to lifetime health-care benefits based on the contract in effect when they left the company. A federal judge in Nashville certified it as a class-action lawsuit in July.
Caterpillar filed two third-party lawsuits July 25 against the UAW and seven locals, saying the union is responsible for retirees’ costs under the latest contract. The suits are pending.
WEB dudes and dudetts–
Check this http://www.youtube.com/watch?v=PM1nRlsXQ_8
video of this Cramer guy having a freaking nervous break-down on his show.
So much for the “arm waving” libs, hehe.
Make no mistake, this was a huge win for the company and a big liability for the Union. There is a reason management was willing to go to the mat over it. $36 billion sounds like a lot of money, but retiree health care is a huge drain. The Union will do ok for a few years, but let’s see where they’re at 10 years from now.
“A quick search will reveal union historical problems handling pension plans for companies.”Posted by: Hotdog1 | September 26, 2007 at 01:30 PM
It may or may not be fair to make comparison to the problems with the Teamsters Pension Fund. They’re really a different breed of union. They have a history of criminality and they have way too many mob ties.
That much money is going to have to be watched very closely. That’s a lot of temptation.
This new plan is okay. The trick will be to control drug companies. Price controls started with doctors, then hospitals, and now the only free enterprisers are Big Pharma.
Actually, they’ve got it better than free enterprisers thanks to the FDA. Company A develops say a cholesterol-lowering statin. It gets FDA approval. It has its scientists create as many molecularly-related congeners as they can think of. These get patented to keep anyone else from inventing them, and marketing them. Nevertheless company B’s scientists come up with a new compound outside of company A’s patents.
They test it, and it works as well as company A’s marketed statin. Great! In a free market they can market it AT A LOWER PRICE THAN COMPANY A’s DRUG. Like Michael Dell did: his PC’s didn’t break new ground, they were just sold cheaper than the competition. Ca-ching for Dell, and a boon for consumers.
On company B’s plan to market its statin, fogedabout it. The FDA requires new drug application contestants to be BETTER THAN already-approved drugs. Equal efficacy, at a lower price? Not allowed. Generics can come on board–after 20 years. Actually longer, because original manufacturers play games.
It is drug costs that are the primary healthcare cost inflator, and have been since the late 1980’s.
I learned about statins in the 1970’s. Actually, not about any marketable statins because there weren’t any. But more than a decade of federally-funded university research elucidating the physiology of the liver, gall bladder and small intestine led federally-funded researchers to conclude that it would be possible to develop drugs that would bind cholesterol in the gut, and reduce its absorption into the bloodstream.
Drug companies jumped on this. They hired Ph.D.’s who had participated in the university research, as federally-funded grad students, postdoctoral fellows and faculty. Moreover, they then patented compounds that were actually “obvious” and should not have been patentable because government-funded researchers were suggesting these very types of compounds.
There is a drug called erythopoietin, known as EPO. Used to treat anemia for dialysis patients, and by athletes to boost red-blood-cell counts. The genetic engineering had been worked out in mice by Australian government-funded researchers. A researcher at New York University was working on a human variant, albeit with only a million dollars per year funding. Some sharpie Chicagoans thought, “If we put $20 million a year into this, and frog-leap the university researchers, we can win a patent.”
They did this, and made billions of dollars. They should never have received a 100% patent. Five percent would have been highly generous. One percent would have been completely equitable.
How about the claimed “$500 million” clinical trial costs born by drug companies? Inflated nonsense. The vast majority of clinical trial patients’ medical care is provided by insurance coverage, both private and public (Medicare). Take 200 patients in a Phase I drug-safety trial. Then put 1000 into a first-measure drug-efficacy trial. Then take 10,000 patients in a Phase III new drug trial. The real costs are less than $10,000 per experimental patient in Phase I/II and less than $5000 in Phase III. That’s $112 million, not $500 million, and insurers are bearing most of the cost.
What we have is analogous to university researchers running a marathon, Big Pharma being able to enter sprinters for the last 200 meters, and Big Pharma stepping up to the podium to receive “marathon” medals for beating everyone else in the last eighth mile. It’s a great racket if you can get into it.
The Democrat Congress has been trying to cut funding for the Department of Labor’s oversight of Union Pension funds.There have been a string of union pension fraud cases, recently.However, the Democrats in Congress would rather protect their Union Boss friends than
protect workers.I believe that the same “watch dog” government agency is in charge of Union health insurance, as well.
http://www.nlpc.org/olap/congress/020910a.htmprotect the workers.
http://www.nlpc.org/olap/congress/020910.htm
http://www.oig.dol.gov/public/testimony/20020910.pdf
As Labor Unions go, the UAW is not known for many of these kinds of problems, but the workers and members better keep an eye on things!
http://www.nlpc.org/olap/congress/020910a.htm
Sorry, of the three links, above, the top one got corrupted by my clumsy typing.
http://www.nlpc.org/olap/congress/020910a.htm
http://www.thelaborers.net/NEWS/dol_obtains_ullico_judgement.htm
http://www.cpfiuoe.org/pages/articles/43justicedept.htm
Type “UNION PENSION FRAUD” into your browser.You will NEVER be able to read it all.
Union Health Insurance Fraud:
http://www.nlpc.org/view.asp?action=viewArticle&aid=1251
This is part of the Department of Labor plan that the Democrats are trying to cut:http://www.oig.dol.gov/public/testimony/20040226.pdf
This is from the Blue Cross website.It is a news story about how Union members are worried about this UAW deal:
http://www.bcbs.com/news/national/uaw-wary-of-health-care-changes.html
This was a HUGE win for GM.
Yes, Econ, it was a huge win for GM on this deal. I hope the VEBA works out for the UAW retirees, I truly do. Although the UAW doesn’t have a particularly bad history, as you have pointed out, there is much bad history out there with reference to union managed pension, etc., funds.
You think the Health Insurance fund is questionable, you need to consider the Pension fund as well.
Can you say PBGC anyone?
You WILL know what PBGC means if the Union bankrupts GM.
You know what’s sad?
Calling this a “big win” for GM.
How can anything that hurts a company’s workers be a “win” for anybody?
That’s what wrong with this country–a competitive attitude in which one thinks he “gains” only by making someone else lose, instead of understanding the truth that we all sink or swim together . . .
CapnI do not entirely disagree with your observation and comment, above.
However, what is needed is for Union workers to realize that corporations must make a profit in a competitive environment.
YES, there are corporate abuses. For every corporate wrongdoer, I can point to a Union boss who is equally corrupt.
However, one of the areas where I think the Unions let down their workers is obvious to me, and completely ignored by the Unions:
In the area of unjust “golden parachutes” and excessive executive compensation, how many times have Unions, who own $Billions in corporate stock, ever brought a resolution forward at a shareholders meeting to correct such over-reaching? No, they might not prevail very often, but the publicity alone would be a check on excess.
Unions should not abuse their stock ownership by demanding corporate acceptance of unreasonable collective bargaining demands.
As stockholders, however, Union pension plans can certainly insist on sound fiduciary judgenment and sound Board of Directors oversight on all executive pay packages.
This would all take work.
Union leaders are mostly in in for the money and the political pay-offs.
More money and more political back-scratching can be had by stirring the pot on hot-button political issues.
Besides, as posted, previously, many unions would rather not have their own activities questioned, so they stay away from the financial oversight duty.
How can anything that hurts a company’s workers be a “win” for anybody?
That’s what wrong with this country–a competitive attitude in which one thinks he “gains” only by making someone else lose, instead of understanding the truth that we all sink or swim together . . .
Posted by: CapnAmerica | September 26, 2007 at 07:27 PM
IF GM is able to survive as a company, this agreement is a win-win for both the company and the employees.
This agreement is a compromise among the greedy parties on both sides.
When both sides lose sight of their primary purpose, that is the primary purpose for ANY business – To satisfy the needs of their customers while making a profit, then the days are numbered for both the company and the employees.
MaxVERY well saidAmen!
That’s how they’ll get competetive with foreign manuf., reduce American wages until equilibrium is achieved. So the people coming up short on the deal, are the future workers for the company. When equilibrium is achieved the middle class will be extinct.
Econ101 said:”YES, there are corporate abuses. For every corporate wrongdoer, I can point to a Union boss who is equally corrupt.”
Now, I am tired of your bs and bashing good American workers…START NAMING! I am not talking about dragging up names from the Teamsters of the past, I mean real Union leaders. And don’t give me inflated figures from some antiUnion web site, give verifiable figures, like those that match the dollar amount of those stole from management of the likes of Enron, Global Crossing, Tyko, etc, or even our own Kansas power company if you want to get close to home!
The Union leaders I know stand strong for their brothers and sisters, negotiate in good faith, understand the workings of business, and also understand that business is a partnership between worker and management. One can’t do his job on a long term basis without the other doing his. And by the way, I don’t know of any Union leaders that are overpaid, either. As the matter of fact, they usually took the job because of their desire to be of service to their coworkers and rose in the ranks because they did a good job. With the education, background, and experience they have they could make quite a bit more money per year if they were on the management side than they do in Union leadership, but it is much like teaching: There is more to a job than just the money a person brings home. There is the satisfaction of knowing that you did a job well that needed to be done and were an asset to society for doing it.
“”"”This new plan is okay. The trick will be to control drug companies. Price controls started with doctors, then hospitals, and now the only free enterprisers are Big Pharma.”"”"
The UAW has one advantage being in Detroit- they can pay the “Canadian price” and send their members across the bridge to fill prescriptions. For example if drug A cost $35 in Canada and $70 in Detroit, the plan can simply say “we will pay $35 toward the cost of drug A” and tell members that will cover 100% in Windsor Ontario which has several pharmacies right across the bridge. Or the member could elect to pay the difference in the USA
“”"The Union leaders I know stand strong for their brothers and sisters, negotiate in good faith, understand the workings of business, and also understand that business is a partnership between worker and management. One can’t do his job on a long term basis without the other doing his.”"”"
The problem in most companies is the management. Most of them are older and closed minded to any changes that would help the company improve its bottom line. The management of GM should have seen the writing on the wall with big huge SUVs and trucks. $1.50 gas was not going to be around forever. They were warned by many people that the market for those vehicles was going to collapse. And as much as I hate to say it, it is much the same in my company. I could easily save my company a few million a year by just doing a few things differently but we have no way to express our ideas to management to save money. They are closed to any change. We are a technology company that doesn’t use technology to increase efficiency and save money. But come contract time, they will certainly demand we give back as they always do.
Kev,
Your point about UAW in Detroit sitting next to Windsor, Ontario is interesting.
Most GM UAW workers would not, unfortunately, be able to convenienty fill their prescriptions by crossing the border. For example, driving from Fort Wayne, Indiana to Canada, picking up prescriptions and driving back would be an 8 hour 400-mile proposition. Assuming one drove a 25 mpg car, that would cost over $40 for gas alone, not including vehicle wear costs.
But then you have really inconceivable trips, like from Wentzville, Missouri; Spring Hill, Tennessee; Bowling Green, Kentucky; Fredericksburg, Virginia; Janesville, Wisconsin; Arlington, Texas (800 miles RT to Mexico?); Doraville, Georgia…
Then, if the UAW-GM deal becomes a “blueprint” for Ford and Chrysler, this will generate even more not-living-near-Canada worker drug costs.
To give most UAW workers Canadian drug prices, UAW would have to organize mass-union drug purchases and importations from Canada for distribution to its members, which would require new federal law. Which drug companies would fight tooth and nail, because because America is, alone among industrialized countries, Big Pharma’s sole remaining windfall-profit-generating “cash cow”.
This isn’t free enterprise. It’s closer to monopolistic. We can import all kinds of products from China, including dangerous, toxic goods, but not high-quality, purity-assured drugs from Canada? Does this make sense?
Great post MPS
“It’s closer to monopolistic. We can import all kinds of products from China, including dangerous, toxic goods, but not high-quality, purity-assured drugs from Canada? Does this make sense?”
Only if you are a republican who hearts big pharma…
RustyTry clicking on some of my links, above your stupid comment.Do you have any idea how many Union bosses are in JAIL for corrupt activity?
Union Boss Pay is WAY up:
http://www.nrtwc.org/nl/nl200703p7.pdf
This Union Boss stole $27 MILLION:
http://www.thelaborers.net/lexisnexis/articles/exunion_boss_guilty.htm
There is more to a job than just the money a person brings home. There is the satisfaction of knowing that you did a job well that needed to be done and were an asset to society for doing it.
Posted by: RustyFord | September 27, 2007 at 01:20 AM
That is by far the funniest BS I’ve ever heard from a Union Member!
FolksThe exchange rates between USA and Canada are now equal, dollar for dollar.
The exchange rate difference was part of the drug price difference.
The remaining difference is primarily due to the fact that drug companies don’t face anywhere near the tort liability in Canada as they face in the United States.
Addtionally, the standard of living is lower in Canada. Therefore, the Pharmacist and everyone involved in delivering the product is paid LESS in Canada, which is reflected in the price.
HereThis link does “Name names” — it is a virtual phonebook of all the Union corruption that has been doucmented, in court. There are thousands of entries:
http://www.nlpc.org/artindx.asp
When Boeing sold to Onex, a couple thousand of us lost our retiree health care. Boeing was flush with 130 million dollars allocated to the fund for us. It diappeared before the sale. That money was deposited in that account in lieu of wages and other benefits. They stole it and the IAM took them to court to recoup it. My point is that if a fully funded health account can be stolen by a wealthy company you workforyour entire life, nothing is sacred anymore.
Max–
Union men built the tanks and bombs that won World War 2.
You’re not good enough to join a union.
Continue to let your boss crack your ass with a whip and never forget to say, ‘thank you, sir, may I have another.’
CapnRosie the Riveter made lots of airplanes.Most of the men were off to war.
And Capn, I AM THE BOSS.
Go F yourself now!
I AM THE BOSS
Shift leader at Taco city doesn’t count.
A good run for organized labor. Cessna stood up and got a better contract than the weak Beech union has ever got. The GM workers stood up and the suits backed down. We need more of that.