Chrysler, UAW Nearing Deal on VEBA Payments To Help Chrysler Secure Remaining Federal AidChrysler Group and United Auto Workers are close to a deal in which the automaker would use company stock to fund half of its obligation to a health care fund for retired workers, the New York Times reports. According to the Times, Chrysler owes $10.6 billion to a voluntary employees' beneficiary association that funds health coverage for the company's retired autoworkers. Chrysler is seeking the concession as it attempts to develop a restructuring plan before an April 30 deadline set by President Obama (Vlasic, New York Times, 4/17).
Former President George W. Bush in December 2008 announced an agreement to provide $17.4 billion in short-term loans to automakers General Motors and Chrysler that required UAW to accept half of the VEBA contributions in newly issued stock, rather than cash (Kaiser Daily Health Policy Report, 12/22/08). Chrysler must meet the deadline to receive the remainder of its portion of the federal loans. Chrysler could be forced into bankruptcy if it is unable to restructure, according to the Times.
GM, which has a $20 billion obligation to the trust fund, is in similar talks with UAW. However, UAW currently is concentrating on Chrysler, which must secure a deal on the health care issue before completing a proposed alliance with Fiat, according to the Times (New York Times, 4/17).
Representatives of about 200,000 retired salaried workers from GM, Chrysler and auto parts maker Delphi are working to secure their benefits packages, including health coverage, as the firms consider reorganization to secure additional federal aid. GM has until June 1 to present to the government its plan, which must include new labor terms with UAW and a debt-reduction agreement with its bondholders. According to the Wall Street Journal, salaried retirees are "among the most vulnerable groups" during restructuring because they are not represented by unions and companies generally have no restrictions against reducing their retirement packages.
Salaried workers typically pay more of their health care costs compared with hourly workers represented by UAW but still have "generous benefits relative to the overall work force," the Journal reports. However, GM over time has increased the amount salaried workers contribute to coverage by raising premiums and copayments. This year GM eliminated medical coverage for retirees and their dependents older than age 65 who are eligible for Medicare, instead offering them a "medical expense credit" to help with additional costs. People representing the retirees are scheduled to discuss ways of preserving their benefits in a conference call Friday. Sen. Sherrod Brown (D-Ohio) on Wednesday wrote a letter to Treasury Secretary Timothy Geithner on behalf of the salaried workers. Sen. Carl Levin (D-Mich.) sent Geithner a similar letter earlier this month (Kellogg/Terlep, Wall Street Journal, 4/17).