Retirees wait and hope
Though he wasn’t sure how a proposed union health care fund would work,
recent experiences with his health care coverage make General Motors
retiree John Lattanzi concerned about negotiations between GM and the
United Auto Workers.
Lattanzi, 55, who calls his North Jackson family a ‘‘frequent flier of
his health care benefits,’’ gave up physical therapy treatment for a
slipped disc pinching a nerve in his neck because of $200 co-payments.
Now, he says he doesn’t know what to think as GM and the UAW discuss the
automaker’s proposal to pay into a Voluntary Employees Beneficiary
Association, or VEBA. GM would use the fund to address $51 billion in
unfunded retiree health care liabilities.
A labor expert believes the automaker needs to put up more cash for the
union to take on the risk. Lattanzi just feels nervous.
‘‘It just irritates me that when you retire — and I don’t want to sound
selfish or greedy — there’s a promise that you’ll be taken care of the
way you were when you gave (the company) concessions or givebacks. It
hits hard. I don’t think GM has a heart because of that,’’ Lattanzi said
Lattanzi, like thousands of other local GM-Lordstown plant retirees, is
watching closely the news on GM-UAW labor contract negotiations. While
the existing contract expired a week ago, workers have stayed on the job
while management and labor leaders inch toward a new pact.
The latest proposal has the sides discussing the automaker’s proposal to
pay the union to form the trust and take over the company’s huge retiree
health care obligation, sources have said. All economic issues,
including pay, work rules, job security promises and health care
contributions, are contingent on whether a VEBA is agreed to, so the
negotiations have slowed.
Whatever is agreed to in the GM-UAW negotiations likely is to be the
pattern for labor talks with Ford Motor Co. and Chrysler LLC. The union
has tabbed GM as the potential strike target of the three automakers.
It’s possible that things could turn ugly for GM’s 540,000 retirees if
the union shoulders the company’s health care liabilities, according to
local labor expert John Russo of Youngstown State University’s
Williamson College of Business Administration. But Russo agrees with
another union spokesman that the fund could act as a safety net in case
the worst happens and the company closes.
Russo said the major obstacle the VEBA has to pass is the gargantuan
amount of money it would take to create. An independent party is
studying each side’s position on the proposal with the major issue being
how much money GM will put into the fund, according to reports.
‘‘The future liability is enormous ... It’s going to take a lot of
resources and money to fully fund that,’’ Russo said.
Recent reports state that UAW president Ron Gettelfinger turned down an
offer on the fund Tuesday, though it still is being negotiated. Russo
said GM may need to make the fund more appetizing before the union would
bite. He said GM could offer moratoriums on plant closings and promises
of investing in American plants, though paying a hefty sum to kick off
the fund is the key. Recent reports say the automaker planned to pay
between 65 to 70 percent of its obligation to retirees.
Though he said the offer represents an enormous amount of money, it may
not be enough according to Russo. A smaller VEBA which covered only
out-of-pocket expenses for workers barely passed in 2005, he said. But
with the union taking all the risk, Russo said the proposal’s survival
hinges on how much GM is prepared to give the union.
‘‘Unless the company puts up more money to prefund the VEBA, I don’t
think it will pass ... That’s not to say it wouldn’t work at a certain
level,’’ Russo said.
Russo said that if GM is able to get health care off its books, the
company would become more profitable and would be able to borrow money
more cheaply. The union could benefit by having control of their own
health care, which is important if the company starts closing plants.
Russo said the government has allowed troubled companies to shed
liabilities like health care.
Joseph Smolka, who retired in 2006 after 38 years at the Lordstown
plant, is apprehensive about the deal, but he seemed to agree with
‘‘Sooner or later the people out there are going to retire. If the plant
closes, they’re screwed,’’ he said.
Which is precisely why the United Steelworkers International union
benefits from a VEBA with tiremaker Goodyear Corp. which began in 2006,
according to spokesman Gerald Dickey.
‘‘By and large our workers feel better, at least in our circumstance.
I’m not going to speak for the UAW. But they’re much more comfortable
knowing there’s a fund there secured by union oversight and not the
company doing whatever they want with it,’’ Dickey said.
Dickey said his union had a troubling history of sudden plant closings
and bankruptcy. He used LTV Steel as an example, saying that when the
company declared bankruptcy, there was a run on health benefits, which
sucked the fund dry in less than a year.
‘‘Whatever ailments retired people had, they knew they had better take
care of them as soon as possible ... It lasted half as long as they
predicted,’’ he said.
But an unfunded liability is just that, according to Russo. Once the
union takes it, there’s no going back.
If the fund runs into trouble because of rising health care costs, the
UAW would be forced to decide between raising deductibles and co-pays
for their retirees or going to their current employees for more money.
Russo said this could create an internal conflict which pits workers
against retirees. Some retirees who may no longer bring in any money to
pay for health care may already feel bitter.
‘‘You take a lower wage in expectation that you’ll be taken care of at
the end and suddenly you’re not. It breeds a powerful type of
resentment,’’ Russo said.
Should the deal go through, the UAW would become one of the nation’s
largest consumers of health care, according to recent reports. But Russo
was doubtful when asked if that kind of money could give the union any
‘‘I think that sort of stuff could be true in a perfect world, but the
risks are too high for the union and I think that’s why they’re
balking,’’ he said.
But as negotiators quibble back and forth in Detroit on an hour-by-hour
basis, people like Smolka are left to sit back and watch.
‘‘It’s going to be interesting. When I started in 1968 everything was
covered and there weren’t any limitations. Now it’s pfft. I wouldn’t
want to be starting over,’’ Smolka said.