A message from UAW President Ron Gettelfinger, UAW Vice President General Holiefield, and the UAW Chrysler Hourly and Salaried National Negotiating Committees
Dear Brothers and Sisters,
During negotiations for a 2007 agreement with Chrysler, the company demanded steep reductions in your retiree medical benefits. We have spent several months in difficult and complex bargaining with Chrysler on this subject.
Chrysler argued that they have the right to unilaterally reduce or eliminate retiree medical benefits, as they have done with thousands of their non-union salaried retirees. Chrysler could have taken us to court on this issue, and if the company prevailed, your benefits would be at risk.
We argued strenuously that Chrysler does not have the right to unilaterally modify or eliminate your benefits. While we feel confident of that position, going to court always involves risk. We wanted to avoid the uncertainty that would be created had we been forced to rely on the courts.
In addition, while we believe that Chrysler is both legally and morally obligated to pay retiree medical benefits, the company’s obligation is largely unfunded. Continued benefits depend on Chrysler’s financial health. If the company were to file for bankruptcy, retiree medical benefits could be cut or eliminated entirely. Unlike pension benefits, there is no required funding – and no government backstop – to protect retiree medical benefits. We have seen thousands of retirees at other companies lose their retiree medical benefits completely when the employer that promised to pay them sought “protection” in the bankruptcy courts.
We do not ever want to see UAW Chrysler retirees in that position.
Instead, we insisted that Chrysler agree to a funding plan that would secure retiree benefits for the long term. We are pleased to report that we have achieved our objective.
In these negotiations, we have obtained financial commitments from Chrysler, totaling over $10.3 billion, to pay for retiree health care benefits. This includes Chrysler’s agreement (subject to ratification and court approval) to contribute $8.8 billion to establish a Voluntary Employee Beneficiary Association (VEBA) that will protect your retiree medical benefits at modified levels. The VEBA will operate as an independent trust and will become operational in 2010; until that time, Chrysler will continue to pay for retiree health care benefits, at a projected cost of $1.5 billion.
Active workers will contribute to the VEBA through COLA deferrals and by contributing the cost of a foregone wage increase. Retired workers will contribute to the cost of their own health care through modest monthly premiums, deductibles, and coinsurance, as described on page 6. These contributions are identical to those agreed to by GM and Ford workers in 2005.
While recognizing the need for worker and retiree contributions to the cost of retiree health care, your bargaining team insisted that we protect our most vulnerable retirees, those with pensions of $8,000 or less and a benefit rate of $33.33 or less. These retirees will be exempt from monthly premiums, deductibles and co-insurance.
In addition to securing health care funding through the new VEBA, we put a high priority on improving pension incomes for current retirees. The tentative agreement includes improved pension benefits for all classes of retirees, together with lump sums in all four years of the agreement, as decribed on page 10. These increases will protect our retirees’ standard of living and will more than offset the cost of past and future Medicare premium increases.
We know that despite our efforts to minimize the impact of these health care changes, the additional monthly contributions, co-pays and deductibles will be difficult for many retirees and their families. The overall impact of this agreement, however, will be to safeguard the health benefits and economic security of UAW Chrysler retirees, so that you can look forward to the future with confidence, not uncertainty.
We are proud that we have been able to accomplish this goal to protect you and your family.
In grateful solidarity for your contributions to our union,
Ron Gettelfinger, General Holiefield and your UAW Chrysler Hourly and Salaried National Negotiating Committees