Epic Auto Contract Talks Focus on Health Care

Chrysler CEO Bob Nardelli and UAW chief Ron Gettelfinger i i

hide captionBob Nardelli, right, the new CEO and chairman of Chrysler, joins Ron Gettelfinger, president of the United Auto Workers, at an Aug. 1 announcement of the sale of Chrysler to Cerberus Capital Management.

Bill Pugliano/Getty Images
Chrysler CEO Bob Nardelli and UAW chief Ron Gettelfinger

Bob Nardelli, right, the new CEO and chairman of Chrysler, joins Ron Gettelfinger, president of the United Auto Workers, at an Aug. 1 announcement of the sale of Chrysler to Cerberus Capital Management.

Bill Pugliano/Getty Images

In Depth: The Man Leading the UAW

Right now, Ron Gettelfinger may have the hardest job in American labor. He runs the United Auto Workers. And on Friday, he kicks off the toughest contract talks in the union's history.
Read a profile of the man who leads the union as it tries to play a weak hand in dangerous times.

When contract time rolls around in Detroit, people always say the negotiations are the biggest ever. This time, that may actually be true.

At midnight Friday, the current contract between the United Auto Workers and Detroit's three car companies ends.

Both sides are trying to work out a new deal that would help the struggling firms and protect workers' benefits. Some people who follow the industry say its future is at stake.

Ford, General Motors and Chrysler lost billions of dollars last year and worker health-care costs are soaring. The companies say they need big changes to turn their businesses around. David Cole, who chairs the Center for Automotive Research, a think tank in Ann Arbor, Mich., says the tone surrounding negotiations has completely changed.

"The company was like the Rock of Gibraltar," Cole says. "It was always going to be there no matter what. What's different now is the uncertainty about the future of the companies."

Neither the union nor the companies will discuss contract talks.

By all accounts, the big issue appears to be health care. The companies have promised about $100 billion worth of health care to retirees.

That puts them at a huge disadvantage with foreign competitors, such as Toyota and Honda. The Detroit companies think they have a solution: put money in a trust fund and let the union take over responsibility for managing health care.

The plan would protect the auto firms from rising costs and protect union members if a company collapsed.

As it stands now, Cole says: "If any of them does go bankrupt — as we've seen in many cases — health care could disappear."

But there are big sticking points, such as how much money would the companies contribute. Cole suggests they might pay 60 to 70 cents on the dollar, but given rising health care costs, the union wants more.

Earlier this year, the United Steelworkers cut a similar deal with Goodyear Tire & Rubber Co., and it's now seen as a possible model for Detroit.

Steelworkers Vice President Thomas Conway ran the union's negotiations. He says after Goodyear initially offered 40 cents, then 50 cents on the dollar, the union went out on strike.

Without enough money, the Steelworkers worried the trust fund might run dry.

Eventually, the company agreed to pay more than 80 cents on the dollar.

Another sticking point in the talks was how to pay for a trust fund.

Goodyear wanted to use company stock. But given that Goodyear had threatened bankruptcy a few years back, the Steelworkers insisted on cash.

"This isn't really something we think we had the stomach for," says Conway. "I don't want to have to watch Goodyear's stock every day."

The car companies have also talked of using stock and auto workers are equally skeptical.

Ron Lare is a Ford worker in Dearborn, Mich., who retires next year. He's also part of a dissident union group called Soldiers of Solidarity. Lare says taking stock makes no sense.

"It's astonishing to me that either the company or the union could even try to persuade members that the company is in trouble, therefore you should rely on the company stock," says Lare.

But workers also acknowledge their employers need help. Charles Yates retired in June after 31 years at an Illinois plant that makes the Ford Taurus. He's worried about the future of his health care, but he's willing to consider a trust fund.

"It sounds like it could be a good idea," he says. "Part of it is getting some of the financial burden off the company so they can get some liquid cash."

And so, the thinking goes, companies could use that savings to develop new products and become more competitive.

Of course, selling all this to union members won't be easy. No one expects a strike. But the last time Ford workers were asked to reduce their own health care benefits, they almost voted it down.

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