Detroit – As bargainers for the United Auto Workers and General Motors Corp. continue to haggle across a table in Detroit, the big issue in the critical contract talks comes down to this: If GM pays the union to take on the company’s huge retiree health-care obligations, can the UAW’s investments return more than the rate of health-care inflation?
GM wants to unload much of its roughly $51 billion in unfunded retiree health costs to a trust that would be administered by the union. The UAW in exchange wants promises that GM will continue building cars at union-represented plants.
It’s the key obstacle of the talks, and the complexities are what’s dragging them out. Whatever GM and the union agree to likely will be copied when it comes to Ford Motor Co. and Chrysler LLC, and experts say other companies with large workforces could follow.
The trusts, called Voluntary Employees Beneficiary Associations, or VEBAs, would let the companies remove the liabilities from their books and possibly raise their stock prices and credit ratings.
Most economists think health- care costs will rise 6 to 8 percent annually, an analyst said.
The stock market has risen 10 percent to 12 percent per year since 1934, said Kevin Tynan, senior automotive analyst for Argus Research Corp.
But market volatility, plus GM’s desire to pay far less than its entire health-care obligation – 65 percent to 70 percent, by most accounts – will make it difficult for the union, Tynan said.
