UAW, DCX Talking Healthcare

January 26, 2006

The United Auto Workers has granted Ford Motor Co. and General Motors Corp. concessions on the healthcare benefits for union workers, albeit reluctantly. But when it comes to DaimlerChrysler, the signals for a deal on healthcare are altogether more ambiguous.


Both Dieter Zetsche, DaimlerChrysler chief executive, and Tom LaSorda, Chrysler Group CEO, have indicated they are confident the union is prepared to approve healthcare concessions similar to those already delivered to GM and Ford. 

However, UAW president Ron Gettelfinger, who likes to say the devil is in the details, is a master at drawing out negotiations, particularly when there is no advantage to the union in a quick settlement. He has noted there are subtle differences in the so-called pattern contracts at DaimlerChrysler, General Motors and Ford. For one thing, going back to the concessions days in the early 1980s, Chrysler always had an escape clause that allowed the company to shift some costs in some plans to employees if the company's overall bill increased too quickly, which it did last year.

Thus, Gettelfinger noted recently that the union had already adjusted healthcare plans at Chrysler. Gettelfinger also said the concessions, while painful for the union, were necessary because ofU.S. market share losses at Ford and GM. Both automakers saw their U.S. sales drop 4 percent in 2005.

“It was a long year,” Gettelfinger said in a speech to the Automotive News World Congress. “It was probably one of the most painful, excruciating decisions that we ever had to deal with as a union.”

On the other hand, Chrysler's market share was up 5 percent. Nevertheless, Gettelfinger said the same team that studied Ford and GM's finances is currently reviewing Chrysler's records to determine if concessions are needed. In addition, Nate Gooden, the head of the UAW's DaimlerChrysler department, has told local union leaders that UAW is honor-bound to discuss concessions with Chrysler.

Even if the UAW does negotiate the additional healthcare changes with Chrysler, it may not be able to get them ratified.

The union's DaimlerChrysler council was divided on the issue in November and anti-concession sentiment among local union officers remains strong.

Sean McAlinden, director of research at the Center For Automotive Research in Ann Arbor, also noted that a large number of incumbent officers—nearly 70 percent—were defeated in local elections for union officers representing Chrysler workers.  A number of large defeats of incumbent UAW officers generally is a sign of dissatisfaction within the union's ranks, he added.

In addition, the concessions barely passed at Ford where the opposition was weak and scattered, though the opponents did manage to generate a lively "Vote No" campaign on the Internet. The vote on concessions at the Chrysler could quickly escalate into an all-out internal scrimmage with opponents contesting the security of every ballot box and every local vote count. 

Overall the concessions are the most significant made by the union in more than two decades and will save Ford $850 million and GM nearly $1 billion in the years to come. They will require GM and Ford workers to defer a $1-per-hour wage increase next September and cover larger co-payments for prescription drugs out of their own pockets.

Ford and GM retirees also will have to pay a portion of their health insurance premiums for the first time. Total out-of-pocket expenses for retirees with dependents are capped at $752 per year, pending settlement of a federal lawsuit that was filed to pre-empt claims from irate workers.

GM, which is expected to lose more than $4 billion this year, asked for the concessions on health provisions last spring. The runaway cost of healthcare was undermining the giant automaker's competitive position, GM executives said.

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