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The end of the line
Question of the Day
The auto companies, all of which are restructuring because of billions of dollars in losses, want the UAW to do the same thing. They had discussed the idea with the union in advance of the talks, which opened Monday with Ford and GM. Talks formally opened Friday with Chrysler.
At Goodyear, the deal was a good one because union members were worried that retiree health care could be canceled if the company went into bankruptcy, said Howard Kropff, financial secretary for a local union in Akron and one of the union”s bargainers.
“They had no funding set aside for our retiree medical,” Mr. Kropff said. “They pay-as-you-go on it. So if the company ever walked away …”
Goodyear funded about 83 percent of the total obligation; analysts have said the auto companies will try to get the UAW to settle for 50 percent to 60 percent of the total.
But a recent agreement between auto-parts supplier Dana Corp. and the UAW shows that percentage may be low.
Although the UAW won”t comment on the prospect of a trust, earlier this month, it agreed to a Goodyear-style deal with Dana, which is in Chapter 11 bankruptcy protection. In exchange for taking on a $1 billion retiree health care liability, the UAW received $780 million in cash and stock, or about 78 cents on the dollar.
Similar trusts have been set up in the public sector. In New York state, teachers unions in the Poughkeepsie and Kingston school districts run trusts that pay health care costs for active and retired employees.
In both cases, the districts pay the unions less than they would have paid an insurer. The unions then hire a company that negotiates lower rates with doctors and hospitals in exchange for quick bill payments, said Debra Kardas, president of Poughkeepsie”s teachers union.
The trusts, which are self-insured with a policy to cover catastrophes, also save money because they don”t have to make a profit like insurance companies, Ms. Kardas said.
Other school districts and unions are asking for information about the trusts.
But some warn that the trusts may not work for a majority of state and local governments, even if they are unionized — and some are not.
“There”s no state that has one union. They all have many unions — and more than people would think,” said Dick Cauchi, health program director with the National Conference of State Legislatures. “I have not seen anything that suggests states themselves can go that direction” of handing off health care costs to trusts run by unions.
The Goodyear and Dana trusts still must gain court approval, and some Goodyear workers fear that the union got hoodwinked.
“That money ain”t going to last forever,” said Ed Huth, 61, a 42-year employee in Akron who voted against the contract. “That”s not much money when it comes to health care.”
Heading into the contract talks, autoworkers have the same fears.
By Andrew P. Napolitano
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