UAW Solidarity House | 8000 East Jefferson Avenue
Detroit, Michigan 48214 | p. (313) 926-5000
© Copyright 2014 UAW. All Rights Reserved.
Sept. 30, 2011
The UAW has a long history of fighting for and protecting its retirees, and through the years, we have been able to bargain good pensions, Christmas bonuses, pension increases, health care benefit improvements and other improvements for our retirees. We accomplished all these gains for retirees even though many years ago a Republican majority on the U.S. Supreme Court ruled that we do not have the right to strike over retiree issues.
In 2008, when the economy collapsed and General Motors and Chrysler were teetering on the edge of bankruptcy, many Republicans wanted to strip retirees of all health care benefits and throw our pensions to the Pension Benefit Guaranty Corp. (PBGC). If they had succeeded, GM and Chrysler pensions would have been reduced to about 65 percent of the basic pension, and retirees would have been left without any health care. The UAW fought for retirees in the congressional hearings, through lobbying, protesting and many other activities. GM and Chrysler retirees’ pensions and health care were saved as a result.
In the current round of auto bargaining, we were faced with two insurmountable obstacles to winning the gains we wanted for our retirees. First, in the past we were able to fund pension increases and Christmas bonuses out of the UAW Big Three pension funds because the pension funds were either fully funded or, in some years, even overfunded. This year, we face the worst shortfall in our history of pension underfunding. Because of Wall Street’s continuing problems, the GM, Ford and Chrysler hourly pension funds are all underfunded. Obviously, because of this shortfall, we could not use the pension funds to pay for the Christmas bonuses or any other improvements.
The second insurmountable obstacle to winning Christmas bonuses for retirees is the current retiree to active member ratio. The current active UAW membership at GM, for example, is 48,000 members to 405,000 UAW GM retirees, making it nearly a 10-to-1 ratio of retirees to current working members. During these negotiations, the UAW also explored the idea of paying for retiree Christmas bonuses by having each active member contribute to a fund to pay these bonuses. With the almost 10-to-1 ratio of retired to active workers in GM and similar ratios at Chrysler and Ford, funding a $600 retiree bonus for GM retirees would require a nearly $6,000 contribution from each active UAW GM member. The problem is similar at Ford and Chrysler. At Ford, the retiree to active ratio is about 3.5 retirees to each active, and at Chrysler, there are almost four retirees to every active member. Obviously, it is not possible in these economic times with these ratios to fund retiree lump sums out of active members’ earnings.
Finally, we were able to negotiate and ratify a 10 percent contribution from active members’ profit sharing that will be diverted to the Voluntary Employee Beneficiary Association (VEBA). This diversion helps to make possible the modified dental and vision coverage that will be restored by the VEBA for our UAW Big Three retirees in January 2012.
Our hope is that all of the Big Three – with the continued dedication of our UAW members – will return to being a strong and viable company which will help the profitability and stock of these companies rebound, and that the economy and our pension funds will also rebound, making it possible to win yearly bonuses for our retirees in future negotiations.
A July 24, 2007, New York Times story dubbed upcoming Big Three negotiations “the most crucial talks in a generation.” Six weeks later, they ran this headline on a grim Labor Day story: “For UAW, a year of uncertainty.”
It was – with apologies to Charles Dickens – not the best of economic times.
On Sept. 24, 2007, more than 73,000 UAW General Motors members went on strike against the company over job security, economic issues, benefits for active workers and winning investment in future products. Two days later, the UAW national bargaining team reached a tentative agreement with GM in the wee hours. Highlights included job security and unprecedented product guarantees. On Oct. 10, thousands of UAW-represented Chrysler workers went on strike for nearly six hours before settling with the company. And in November, UAW Ford Motor Co. workers ratified a new contract with product and investment commitments.
One of the most important aspects of the labor agreements reached during 2007 bargaining was the establishment of an independent trust fund called a Voluntary Employee Beneficiary Association, or VEBA, to provide protections for medical benefits for UAW-represented retirees from GM, Ford and Chrysler. (On Jan. 1, 2010, the VEBA took over responsibility for providing retiree medical benefits.)
But who would have guessed that by late 2008 and into 2009, our nation’s economy – and the auto industry in particular – would enter its deepest crisis since the Great Depression.
It was indeed the worst of times.
Almost overnight, demand for new vehicles fell from an annual rate of more than 17 million units to an annual rate under 10 million units.
Former UAW President Ron Gettelfinger, along with the CEOs of GM, Ford and Chrysler, met with House and Senate leaders and later testified before Congress to describe the dire situation facing the industry. In the final weeks of his administration, President George W. Bush granted GM and Chrysler federally guaranteed loans that allowed them to survive into early 2009. Within a month after taking the oath of office, President Barack Obama appointed an Auto Task Force to review available options.
Without a government-supervised and supported restructuring of their debt, GM and Chrysler would have collapsed, throwing millions of American workers on the street and leaving retirees without medical benefits of any kind. And even though Ford had mortgaged everything for a $26 billion loan, if GM and Chrysler had collapsed, the supplier industry would have failed as well, in turn affecting Ford.
Current UAW contracts with Ford, GM and Chrysler will expire at midnight on Sept. 14.
Between now and then, the union’s national bargaining teams, who represent UAW members employed by each of the domestic automakers, and the companies’ respective teams, will open negotiations in late July, spend long days and nights hammering out a new tentative agreement and present it to our membership for a ratification vote.
What follows is a comprehensive look at the amazing turnaround following this historic auto industry crisis and the UAW’s bargaining goals for 2011 auto negotiations.
Perhaps this time, amid growing signs of improvement, they’ll open bargaining with a high-five – or maybe even a fist-bump.