Trust fund new to most workers

Trust fund new to most workers

	Published : Wed, 12 Sep 2007 20:31 By : Agencies Print this Story

TRENTON, Mich. (AP) - For something that's so central to the contract talks between auto companies and their unionized employees, most workers say a shroud of mystery covers VEBA, or Voluntary Employees Beneficiary Association.

The union hasn't told them much about it. And management hasn't either.

But it's at the core of the talks -- how to pay for billions of dollars in retiree health costs -- and it could get in the way of smooth negotiations as Friday's contract expiration deadline approaches.

'They are not telling us anything,' said Phil McKinnon, 54, a worker at Ford Motor Co.'s truck plant in Wayne, just west of Detroit. He has read extensively about VEBAs, which are trusts that would be funded by the auto companies, allowing them to turn over to the union the responsibility of paying for retiree health care costs.

Negotiators are discussing how much the companies will put into the fund and what the union will get in exchange for taking on the liability, estimated at more than $90 billion for Ford, General Motors Corp. and Chrysler LLC, according to three people who have been briefed on the talks and spoke to The Associated Press on the condition of anonymity.

Although the union has yet to formally respond on VEBAs, informal talks on the issue have been under way for a while, the three people said. They did not want to be identified because the talks are private.

Most workers interviewed outside three Detroit-area factories this week have at least a basic knowledge of the trusts, but some have never heard of them.

At the sprawling GM transmission plant near Ypsilanti, worker Pamela Beard, 54, said she knew little about VEBAs but hoped to find out details at a union meeting this weekend.

'I'm not really sure about it,' she said in the parking lot of the complex. 'I need to read up on it.'

Ford and General Motors are pushing the VEBAs hard, and Chrysler also is interested. Industry analysts say little else can get done until the VEBA issue is settled, including the union's demand for new vehicles and jobs at U.S. plants.

The three people briefed on the talks say it's likely negotiations will continue beyond the deadline, with the UAW working under the terms of the current contract. Because progress is being made, a strike or lockout are considered unlikely at this point.

The companies see VEBAs as a way to cut or eliminate what they say is about a $25-per-hour labor cost gap with Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co. Retiree health care makes up about $10 per hour of the gap. The auto companies also want the trusts because they would remove a huge liability from the books and likely would raise stock prices and improve credit ratings.

Collectively, the Detroit Three lost about $15 billion last year, and all three have restructured, shedding workers and closing factories to shrink themselves to match lower sales.

Without VEBAs, though, the companies say they will seek the cuts elsewhere, perhaps in wages or by raising employee costs for health care.

But at the factories, there is sentiment against the VEBAs.

'The company should take care of us. It's not the union's problem,' said Jerry Fogarty, 47, who works at a Chrysler engine plant in Trenton, south of Detroit.

Fogarty fears the union would be forced to raise dues to help fund the VEBA at a time when finances are tight for him.

Yet as bargaining continues, there are signs the union is preparing its members to make a decision on VEBAs.

Bryce Cobb Jr., president of UAW Local 372 at the Chrysler engine plant, said he was briefed recently by UAW regional representatives about the trusts, and he plans to pass that information to his members at a union meeting Sunday.

At the Ford plant, McKinnon said workers were shown a video presentation this week from Joe Hinrichs, vice president of North American manufacturing, explaining Ford's competitive disadvantages and health care costs that already have been passed on to salaried workers.

McKinnon sees a VEBA as a possible answer, but knows the company won't give the union the full amount needed to pay the health care costs.

'It'll be funded at a discount. Probably the UAW will come to us, the active members' to pay into the fund, he said.

Together, the Detroit Three had more than 530,000 hourly retirees and spouses, and collectively they paid more than $6.7 billion in retiree health care costs last year.

The companies, according to industry analysts, are willing to pay 65 to 70 percent of the total obligation into the VEBAs. Payments could be in cash or stock.

The 65 to 70 percent figure might be low. The UAW recently agreed to a trust with parts supplier Dana Corp. in which the company paid about 78 cents on the dollar.

And Goodyear Tire & Rubber Co. agreed to form a VEBA for the United Steelworkers for 83 percent of the obligation.

If the companies put enough money in, Cobb said he's confident the UAW can make the numbers work to keep the health benefits coming.

'I believe that the UAW membership and the UAW itself are capable of running anything,' Cobb said. 'We have shown that over the years.'