The deal reached between the United Auto Workers and General Motors this week should serve as a blueprint for future negotiations between labor and management.
The UAW wisely realized that GM could not be competitive and could not maintain a reasonable level of job security for its workers if it had to maintain the growing burden of health care costs for its retirees. The cost was estimated at about $50-billion. GM said that $1,500 in health care costs was built into every car that it manufactures.
Now the burden of those costs has been shifted to the union with a more than $30-billion payment by GM into a union run trust fund, a Voluntary Employee Benefit Association also known as VEBA. The additional $20-billion will come from investments made by the union.
GM can now considerably reduce its hourly labor costs, bringing them closer to what the Asian companies pay their workers in right-to-work states. Having been able to shift $50-billion in health care costs off its books, GM will now be a more competitive company. It is a significant development for the future of the auto industry as well as for all other domestic manufacturers. GM and the UAW have provided a blueprint for how retiree benefits and liabilities can be negotiated and handled in the future.
The deal is good for GM, good for the UAW, and good for America.
