UAW Seeking Legal Protection Against Unilateral Health Care Cuts for Retired Workers, Spouses, Dependents

The United Auto Workers on Tuesday filed a lawsuit against General Motors in an "unusual legal move" in an effort to prevent unilateral changes to health benefits for union retirees and allow UAW and GM to reach an agreement to reduce company health care costs, the Wall Street Journal reports (McCracken/Schultz, Wall Street Journal, 10/19). GM and UAW on Monday announced that they have reached a tentative agreement on health benefits changes for union employees to reduce company health care costs. GM -- which spends $5.6 billion annually on health care for employees -- reported a loss of about $2.3 billion for North American operations in the first half of this fiscal year and announced a third-quarter loss of $1.6 billion on Monday. The agreement would reduce GM retiree health care liability by about 25%, or $15 billion, and would reduce annual health care costs by about $3 billion, Wagoner said. In addition, GM will contribute $1 billion annually in 2006, 2007 and 2011 to a Defined Contribution Voluntary Employee Benefit Association to offset the cost impact of the health benefit changes on retirees (Kaiser Daily Health Policy Report, 10/18). Industry analysts said that the agreement also likely will include increased copayments for physician visits and prescription drugs and might impose monthly premiums and deductibles for health care. Neither GM nor UAW has released details about the agreement.

Lawsuit
In the lawsuit, UAW asked for a court order under which GM could not unilaterally change health benefits for 500,000 union retirees and their spouses and dependents. GM officials have said that the company has authority to change retiree health benefits without UAW approval (Vlasic/Terlep, Detroit News, 10/19). In most cases, the law does not allow companies to unilaterally change benefits for union retirees or unions to negotiate changes in benefits for retirees. According to the Journal, UAW and two union retirees involved in the lawsuit are "essentially asking the court to allow the union to negotiate a reduction in benefits, without negating the union's legal position that the benefits" negotiated in contracts are "'lifetime' benefits and unchangeable" (Wall Street Journal, 10/19). Paul Krell, a UAW spokesperson, said, "The legal relationship between GM and its retirees is different than between GM and its active workers. This says GM can't unilaterally change the retirees' benefits" (Detroit News, 10/19). The court order would protect retiree health benefits in the event that the active UAW employees fail to ratify the agreement. UAW also filed the lawsuit to prevent lawsuits from union retirees over the health benefits changes included in the agreement. According to labor law specialist Thomas Kienbaum, "The UAW cannot bargain on behalf of retirees. So the only way you are going to bind every retiree to the agreement is through a court order" (Detroit News, 10/19). Krell added that previous court decisions have found that changes in health benefits for union retirees require court approval (Wall Street Journal, 10/19). In a statement, GM expressed support for the UAW lawsuit. GM spokesperson Edd Snyder said, "GM and the UAW agreed, as part of the overall tentative settlement announced on Oct. 17, that the UAW would seek court approval." UAW expects to settle the lawsuit with GM. UAW will begin the process to ratify the agreement after union officials meet with local union leaders on Thursday to discuss the proposed health benefits changes (Detroit News, 10/19).

Effects on Auto Industry
Incoming DaimlerChrysler CEO Dieter Zetsche said that the company will seek the same health benefits changes from UAW. Zetsche said, "We have a clear understanding that whatever agreement they come to with GM would be applied in principle to us." Ford Motor officials said they will continue negotiations with UAW on health benefits but did not provide details on the discussions (Wall Street Journal, 10/19).

WSJ Examines Retiree Health Benefits
The Journal on Monday examined several questions that retirees might have as the "health care landscape shifts" and "some new -- and worrisome -- trends are becoming clear." According to the Journal, retiree health benefits "may not be extinct yet," but they are "evolving in ways that increase costs for retirees and create unexpected groups of winners and losers." The Journal examines the stability of health benefits for union and nonunion retirees, the future likelihood of such benefits, increased premiums and the effect of the new Medicare prescription drug benefit (Schultz, Wall Street Journal, 10/19).

Editorials

• Wall Street Journal: Many have said that the health benefits changes in the agreement between GM and UAW "signal the death of the American 'middle class,'" but the "truth is that these changes are the only way to preserve it," a Journal editorial states. The editorial adds that "financial security requires individuals to have more freedom to negotiate their own health care and retirement funds, and the ability to transport them from job to job across a lifetime of work." According to the editorial, "The key is ownership, not paternalism" (Wall Street Journal, 10/19).
  


• USA Today: The agreement "signals that the union is finally facing reality" -- companies "can't continue to pay all health costs for workers, dependants and retirees and survive against foreign competitors free of that burden," a USA Today editorial states. Although the agreement is a "promising sign," GM and other automakers also must "get costs down and develop a more reliable revenue stream through a better, more diverse line of vehicles," according to the editorial (USA Today, 10/19).
  

Opinion Pieces

• Derrick Jackson, Boston Globe: Health care costs "are out of control," but "shifting them from the company to the worker is no solution," Globe columnist Jackson writes. According to Jackson, the "sigh of relief" for GM is a "fresh reason for Americans to scream for a national solution on health care" (Jackson, Boston Globe, 10/19).
  


• David Lazarus, San Francisco Chronicle: The agreement indicates that the U.S. has "reached a critical turning point in the decline of health care," one "almost certain to expand the already appalling figure of 45 million people lacking health coverage nationwide," columnist Lazarus writes in a Chronicle opinion piece. He adds that the current employer-sponsored health insurance system "is no longer viable in the face of double-digit annual increases in health care costs" (Lazarus, San Francisco Chronicle, 10/19).
  


• Holman Jenkins, Wall Street Journal: The agreement moves GM "up to ... about 1995 in corporate America's attempt to wrestle into submission the consequences of its own foolish (tax-driven) decision to pay employees in health care rather than dollars," Journal columnist Jenkins writes in an opinion piece. He adds that "peace" between GM and UAW "isn't at hand," as "UAW's graying cadres understandably care more about maximizing their retirement benefits ... than about GM's survival" (Jenkins, Wall Street Journal, 10/19).