UAW Agrees to Defer VEBA Funding, Suspend Jobs Bank

By Chris Haak

12.04.2008

Leaders of the UAW met today in Detroit to discuss what concessions the union might be willing to offer to show both the theme of shared sacrifice to convince Congress that the union is doing its part to save the companies that employ its members, and to actually do something that might help preserve the rapidly dwindling number of UAW-represented autoworkers in the US.  The result of that meeting is the UAW’s agreement to allow GM, Ford, and Chrysler to delay scheduled multi-billion dollar funding of the VEBA trust that was to have eventually assumed the companies’ retiree healthcare obligations and also “suspended” the jobs bank, which paid laid off workers up to 95% of their pre-layoff wages for sometimes several years.

The UAW said that these two issues were chosen because they did not require re-opening of the 2007 contracts to agree to.  Re-opening the contracts would have required (and will likely require at some point) additional bargaining between labor and management, as well as another vote by the membership working at each company.  The VEBA funding deferral is a big deal for several reasons; first, it was to have been a huge cash outflow for each of the companies in 2010, when they are still going to be very vulnerable and in need of cash.  Second, the entire reason the automakers pushed for the VEBA was to eliminate huge liabilities from their books, as well as potentially saving money over the next several decades.

The suspension of the Jobs Bank – and you’ll note that it’s not the elimination of it, which means that it will be back at some point, if for nothing else than as a bargaining chip to be used later – means probably less to the short-term cash flow issues facing GM, Ford, and Chrysler (many workers in the Jobs Bank in 2007 were removed from its rolls as part of the then-new collective bargaining agreement).  However, it is a psychologically important step toward shifting public perception away from “UAW members are overpaid, and the union is killing the domestic auto industry” to “UAW members really are finally getting in touch with the real world.”  Actually, with the number of autoworkers who lost their jobs through layoffs and buyouts over the past three years, I’d say that many of them have already been forced to face reality, although a nice buyout package certainly is better than many laid off workers get in other industries.

I view these two moves from the UAW as positives, and UAW president Ron Gettelfinger will likely not be hammered as hard by members of Congress when he gives testimony on Thursday and Friday, but don’t think for a minute that the Big Three are just going to say “thanks” and move on to something else.  These companies need and are expecting a lot more than these two concessions.  While UAW leadership didn’t discuss wage and benefit concessions for active employees, the companies are surely looking for such concessions, and that’s why I believe that at some point in the very near future, the contracts will be re-opened and aspects of them will be renegotiated.  In fact, Chrysler co-president Tom LaSorda – the company’s point man on labor negotiations – told Automotive News that his company would like to go through the whole agreement in collaboration with the UAW to look for cost savings.  That sure sounds like opening it back up to me.

Meanwhile, Ford CEO Alan Mulally told the Wall Street Journal yesterday during his 10+ hour drive to Washington from Michigan that he is extremely concerned about the financial health of GM and Chrysler, and how their bankruptcy would affect Ford.  In fact, the materials that Ford submitted to Congress yesterday afternoon spoke at great length about how the domestic auto industry is very interrelated, with 80% crossover in the supplier base, for example, and nearly 25% crossover in franchise ownership.  In other words, in spite of Ford probably being healthy enough to survive on its own without money from the US government, a GM and/or Chrysler bankruptcy could well bring them down too.  It kind of reminds me of the immense suction that occurs when a large vessel sinks in the ocean, pulling other things down with it.

Testimony begins Thursday at 5:30 p.m.  Stay tuned.

COPYRIGHT Autosavant – All Rights Reserved

Author: Chris Haak

Chris is Autosavant's Managing Editor. He has a lifelong love of everything automotive, having grown up as the son of a car dealer. A married father of two sons, Chris is also in the process of indoctrinating them into the world of cars and trucks.

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3 Comments

  1. Mulally is right, there is so much interconnectivity between suppliers that not getting paid by GM and/or Chrysler could force the supplier out of business despite Ford being able to pay them.

    And it’s not just Ford, either. Plenty of the transplants use those suppliers, too.

  2. I saw Michael Moore on television last night saying that he thinks that the UAW should not have to make any concessions at all, that they’ve given enough. He says the Big Three just need better cars, better management, and they need to stop fighting government regulations.

    I would like to live in such a world.

  3. You need better cars, you need the cash from somewhere, it’s almost a chicken-and-egg situation.

    I guess Michael Moore live on the same planet as Thomas Freedman.(There a good documentairy titled “Manufacturing Dissent” about the “hidden side” of Michael Moore” http://en.wikipedia.org/wiki/Manufacturing_Dissent ) And who knows if the Gettlefinger of the UAW didn’t do the same tricks then Alan Eagleson of the NHLPA did with some hockey players but that’s another story. http://en.wikipedia.org/wiki/Alan_Eagleson

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