Union resists GM on asking retirees to pay for health care

Automaker, UAW in talks on shift of costs to workers

June 17, 2005|By Rick Popely | Rick Popely,CHICAGO TRIBUNE

CHICAGO - Union workers at General Motors Corp. may be resigned to digging deeper into their own pockets for health care, but they say they'll fight to protect retirees from taking the same hit.

The issue is one of the sticking points in continuing negotiations between the automaker and the United Auto Workers union as the company tries to shift more health care costs to the employees to reduce its $5.6 billion medical bill.

"If we're going to survive, we know it's going to come with a price," said Mike Sheridan, president of UAW Local 95 in Janesville, Wis. "But if they try to mess with our retirees, they're asking for war. We don't want a war, but we would fight that."

GM has pressed the UAW to assume more health care costs since it posted a $1.1 billion first-quarter loss, and is pressing the union to intensify negotiations.

The union has said it is willing to continue discussions on concessions but will not renegotiate its current contract, which runs two more years. That could mean accepting higher co-payments or higher prices for prescriptions.

Chairman and Chief Executive Rick Wagoner said at the company's annual meeting this month that GM might cut benefits unilaterally if the UAW doesn't agree to concessions.

But the amount the UAW could save GM without reopening the contract might not be enough to cover inflationary increases. In a research note, JPMorgan Chase & Co. analyst Himanshu Patel said the UAW could save GM only about 5 percent of its health care costs without reopening the contract. GM's health care bill could rise as much as 12 percent this year.

The amount GM wants to save is unclear. The Detroit Free Press and Wall Street Journal reported yesterday that GM wants $1 billion in cuts this year and $1 billion in 2006. GM spokeswoman Toni Simonetti wouldn't confirm those numbers.

Other reports this week said GM has given the union until the end of the month to agree to concessions, though neither the company nor the UAW would confirm that.

Some analysts say GM could legally cut retiree benefits without the UAW's approval, but Sheridan warned, "That's a line they don't want to cross."

The UAW has not threatened to strike if GM unilaterally cuts benefits, though that would be a likely response.

"I think our membership realizes there are some things that the UAW is willing to do, but they want to make sure we take care of our retirees. Those are the guys who worked so hard to get what we have now," he said.

UAW workers at GM and retirees don't pay monthly premiums or deductibles for health care, but white-collar workers and retirees pay both. GM says union employees pay 7 percent of their health-care costs and white-collar employees 27 percent.

GM has 150,000 U.S. employees and 422,000 retirees, and covers 1.1 million people, including dependents.

Benny Riggs, a UAW member for 29 years, knows union workers who retired in the 1970s and haven't gotten cost-of-living increases on their pensions. They collect pensions of about $700 a month, in addition to Social Security and Medicare benefits they are eligible for.

"If they shift some of the cost [to retirees], what does that do for someone who's only getting $700 or $800 a month? It doesn't leave a lot for food," said Riggs, a shop committeeman for Local 2166 at GM's Shreveport, La., assembly plant.

Another reason workers resist cutting benefits for retirees is that about half the 111,000 UAW members at GM become eligible to retire in the next three years.

Sheridan, the UAW president in Janesville, said, "It has a lot more to do with losing market share."

GM had nearly half of the U.S. market in the late 1970s, but its share has steadily shrunk, falling to 25.7 percent this year.

"If they can stop the bleeding, stop the share loss and start to grow the business again, health care becomes less of an issue," said Sheridan, a UAW member for 28 years.

Wagoner has said GM plans to cut 25,000 UAW jobs during the next four years, mainly through attrition, and close an unspecified number of U.S. plants.

The Chicago Tribune is a Tribune Publishing newspaper. The Associated Press contributed to this article.

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