As Big 3 Bargaining Begins - Good News for the Bargainers

With bargaining between UAW and the 3 major American car manufacturers just under way and focusing on the cost of health care (see Kaiser Daily Health Policy Report) at least one potential problem was lifted from their backs as the 6th Circuit today approved a settlement agreement between the UAW, GM and Ford changing the agreement on retiree medical benefits. UAW v. General Motors (6th Cir. 8/7/07).

After recounting the history of bargaining over the years that led to the current crises, Judge Sutton summarized the pre-settlement situation as follows:

These benefits are not inexpensive. Accounting for active and retired workers and their families, GM provides healthcare to 1,100,000 people, making it the “single largest private purchaser of health care in the United States,” with yearly expenditures of $5.4 billion in 2005 and with the lion’s share (nearly $3.7 billion in 2005) going to retiree benefits. GM JA 614. Ford tells a similar story. It spent $3.5 billion to cover 590,000 people in 2005, with $2.4 billion going to retiree benefits. In 2005, these aggregate healthcare expenditures added $1,525 on average to the cost of every GM vehicle and $1,100 to the cost of every Ford vehicle. But for the legacy expenses—the retiree benefits—the healthcare costs per vehicle at GM and Ford would be $480 and $346, respectively. Their Japanese rivals spend an average of $450 per vehicle for all healthcare costs, in other words for the healthcare benefits of active workers and retirees.

In a decision that includes a discussion of the costs of the health care system, the condition of the the auto industry, the conduct of parties in negotiating and is a paean to attorney Billy Payne, who along with the Pittsburgh firm of Stember, Feinstein represented the class members, Judge Sutton affirms the trial court's approval of the settlement which was negotiated by UAW and the auto companies and presented to the class of retirees on a "take it or leave it" basis.

The Court did postpone for another day one portion of the settlement agreement that was not challenged by the 1/2 of 1% of the class members who had objected. The Court deferred what it called an unprecedented attempt to "freeze in time the 'case law' that will govern any future dispute over the vesting of the retirees’ healthcare benefits." Instead, the Court decided to "wait for another day, a day that may never come, to decide how or whether a party may enforce this provision."

For an industry that could use a few good breaks, this seems to be a good, although probably not unexpected, one.