UAW Agrees to Deductibles for Big Three Automakers

Strategic Insights -

The United Automobile Workers union has made a compromise with Chrysler Corp. to introduce deductibles as part of its employee health coverage, and General Motors and Ford may follow suit. This move marks a significant departure from the union's traditional "first dollar" health care coverage, which has been a key benefit for Big Three auto workers. The change is expected to have a ripple effect across the industry, with many workers concerned that they may soon be facing increased health care costs.

Key Takeaways:

  • The UAW has agreed to let Chrysler introduce deductibles ranging from $100 to $1,000 for workers and retirees who use preferred provider organizations (PPOs).
  • This move is a precedent-breaker, as it will make it easier for other Big Three automakers to negotiate similar provisions.
  • The UAW president, Ron Gettelfinger, has downplayed the significance of the use of deductibles, but many workers are concerned that they may soon be facing increased health care costs.
  • General Motors and Ford may follow suit, as the UAW has similar contracts with these companies.
  • The change in health care coverage is expected to be modest, but it marks a significant shift in the union's longstanding "first dollar" coverage.
  • Workers at General Motors, Ford, and Chrysler have expressed concerns that they may soon be facing increased health care costs, citing the depressed business climate and rising health care costs.
  • Over 390,000 Americans are covered by Chrysler, with about 35,000 blue-collar workers and retirees using PPOs.
  • The company expects to reap savings in the low tens of millions of dollars on its annual $2 billion health care bill.
  • The UAW has been facing pressure to make concessions on health care costs due to the decline of the domestic auto industry.

Statistics:

  • The United States market share of General Motors has decreased from 33% a decade ago to 25% in February.
  • General Motors plans to produce 10% fewer vehicles in the first half of the year than it did a year ago.
  • General Motors has been cutting white-collar jobs through buyouts and early retirement packages at a pace of 1,000 to 2,000 workers annually.
  • Health care costs for General Motors exceed $5 billion a year, with about $1,400 of that cost on a vehicle produced in the United States.

Sources:

  • [David Elshoff, a spokesman for Chrysler] "It's a drop in the bucket next to $2 billion, but at the same time it's a significant step and certainly indicates that the U.A.W. has their eye on the same issue."
  • [Sean P. McAlinden, director of the economics and business group at the Center for Automotive Research] "It's a precedent breaker, and it's a union that relies on precedents and agreements."
  • [Ron Gettelfinger, the union president] "We're not going to share costs."
  • [Stefan Weinmann, a G.M. spokesman] "We never talk about our contract with the U.A.W."
  • [Marci Evans, a spokeswoman for Ford] "Ford and the U.A.W. continually have discussions regarding contractual provisions which would include health care."
  • [Craig A. Nothnagel, a G.M. worker and union Local 22 president in Detroit] "Nobody wants to give up any money if they don't have to, but I believe the membership is educated enough and understands enough what's going on around us."