UAW-GM deal cuts COLA pay
In 1970, the UAW struck General Motors Corp. for 67 days. It was a
bitter, costly protest. The reason: The union wanted a cost-of-living
adjustment that would protect its wages from being devoured by soaring
But in a little-observed detail of the tentative contract between the
UAW and General Motors Corp. -- which workers are in the process of
voting on nationwide -- workers will be diverting a substantial amount
of their so-called COLA to pay for the rising cost of health care, for
both active workers and retirees.
Over four years, the amount of the diversions will be substantial: about
$6,240 per worker.
That's according to a Free Press analysis that three company and union
officials close to the negotiations said is accurate, based on the
expected rate of inflation and changes in the COLA formula. (Workers
might contribute less if costs go up more slowly, and GM will not be
able to play catch-up later if inflation is lower than expected.)
Neither the UAW nor company officials wanted to discuss the COLA
But for GM -- with 73,000 UAW workers and an annual health care bill of
$5.4 billion -- this diversion translates into a very significant worker
health care contribution. In all, GM will get about $270 million from
workers' COLA to pay for health care for active workers.
Another $180 million will be diverted from workers' COLA into the new
VEBA, or voluntary employee beneficiary association. That independent
fund, which will have union oversight, will take on responsibility for
providing health care to GM's UAW-represented retirees.
Many workers might not understand how much of their COLA they are giving
up because the UAW newsletter explaining the contract minimizes the
amount of this diversion, said Greg Shotwell, a GM hourly worker and
union activist who runs the Web site www.soldiersofsolidarity.com.
"They have made it very unclear," Shotwell said.
On Page 2 of the "UAW GM Report," which explains the contract's terms to
workers, the COLA diversion is broken down into cents per hour.
The new contract, the report says, continues a 2-cent quarterly
diversion agreed to in the 2005 UAW-GM health care settlement. An
additional 4-cent quarterly diversion will go into the VEBA. And another
4-cent quarterly diversion will go to pay for health care for active
That might sound like just a dime. But that 10 cents actually compounds
for "15 three-month periods beginning Dec. 2, 2007, and ending June 6,
2011," according to a copy of the UAW-GM contract that has been widely
"They're pennies," Shotwell agreed, "but they are pennies per hour, and
they add up."
By the end of four years, workers will have given up $1.50 of their COLA
per hour to pay for health care for actives and retirees.
In the final quarter of the contract, that will amount to $60 a week, or
$240 a month, the Free Press analysis shows.
This COLA diversion method, which already is being used by some other
unions, "is the least painful approach the unions and GM could likely
come up with," said Harley Shaiken, a professor at the University of
California at Berkeley who specializes in labor issues.
"It doesn't mean it's not painful -- it is painful -- but it's the least
painful approach that the union felt that it could take," Shaiken said.
Shotwell agreed: "It doesn't feel like a sacrifice because you didn't
get it yet," he said.
Given the rising cost of health care, the UAW was likely under great
pressure to get its members to pay more -- especially since the union
held the line so tightly on benefit levels.
In return for the COLA diversion, there are little to no changes in the
comprehensive health care coverage for active workers. The UAW
maintained co-payments for prescription drugs at their present levels.
Doctor visit co-payments under the health maintenance organization were
increased to $25, from $10 under the 2003 contract.
But some workers recognize that benefit isn't coming free.
"We are paying," Shotwell said.
Auto analyst Brian Johnson of Lehman Brothers, in analyzing the deal,
noted that the new contract "represents a significant unwinding ... of
the automobile entitlement economy."