AFSCME 3357-HOF'S BLOG

GM-UAW Contract Talks News 9/19/2007

"Stalled." That's how today's Detroit News describes UAW/GM contract talks. The News reports that GM is unwilling to move from 65% funding of the proposed VEBA, the Voluntary Employees' Beneficiary Agreement. The VEBA is the proposed union-run trust for retiree healthcare, and it is the tail that's wagging the dog in the contract negotiations.

Each 5% change in VEBA funding of the $50 Billion retiree healthcare obligations amounts to $2.5 billion in cash. The range speculated in the press early in the negotiations was 60-70% funding, with 70% the most commonly-used figure in the sources that I read. To get you some idea of what $5 billion will buy you in the car industry. $2.5 billion will substantially overhaul an existing car model. $5 billion will pay for most of a ground-up redo.

The UAW is reluctant to sign onto a VEBA that doesn't plan for major increases in the future cost of health care. GM's main impetus in seeking the VEBA is avoiding being on the hook for future increases in the cost of health care.