Now that General Motors has reached an agreement with the UAW to cut $1-billion in annual health-care benefits for more than 750,000 workers, retirees, and their families, there will be a concerted effort by other companies facing financial problems to re-negotiate the health-care benefits of their workers.
This represents a significant shift in strategy for unions, which had once demanded full and cost-free health-care benefits for their workers. The GM-UAW deal portends a new negotiating trend amongst unions as they attempt to preserve jobs at financially troubled companies. Ford and Chrysler are already discussing health care cuts that are similar to those at GM.
The GM health-care benefit cut will result in $3-billion in savings before taxes and save about $1-billion a year in cash. The company did make one concession to the union: GM will make $3-billion in contributions by 2011 to a special fund set up to offset the benefit cuts.
The UAW’s concessions will not be of much use in extracting givebacks in other negotiations, which tend to be industry specific.
We can use this as another example of labor unions over-reaching, causing dire hardships on companies and then,when all is said and done, having to give back what they perceived they had earned.
An unexpected outcome of the GM problem is that some executives in Corporate America are now calling for a national health-care program that will, in effect, relieve corporations of the burden of funding health care for their workers.
