Sunday, September 09, 2007

The UAW's Choking Health Care Burden

ANN ARBOR - "Detroit's automakers have a total of 180,681 hourly workers represented by the UAW. There is a staggering number of 721,025 UAW retirees and surviving spouses who are entitled to retiree health benefits (see chart above, click to enlarge).

The automakers have proposed establishing "voluntary employee benefit associations,'' or VEBAs, to fund retiree benefits.

Automakers might contribute as much as $80 billion to the funds, which would be run by the UAW. The union would invest the money to ensure it had enough money to meet retiree health care obligations.

VEBAs would take the choking obligation to fund retiree benefits off automakers' books, which could help improve their competitiveness.

MP: What company could possibly be competitive and survive when it is obligated to pay health care benefits for 5 workers per employee, one who is currently working, and 4 additional workers who are retired? Ford, GM and Chrysler are paying health care benefits for 900,000 workers, but only 180,000 are actually current workers! Is it any surprise that the Big Three have asked the UAW to take over the obligation for unlimited lifetime health care benefits for its members?

17 Comments:

At 9/10/2007 2:49 AM, Anonymous Anonymous said...

This burden wouldn't exist if all citizens were covered by a national health care program.

Wouldn't businesses faced with huge medical insurance costs be in favor of offloading that cost to the taxpayer?

 
At 9/10/2007 6:21 AM, Blogger Walt G. said...

I've been saving for over 30 years for my retirement—I started at GM 34 years ago today. In all that time, I realized that my income in the future would decline and I would my need savings to fall back on. Am I really that much smarter than GM? I funded my future liabilities and saved for bad times when times were good. Isn't that the proper way to financially plan? Do you suppose GM would understand if I could not pay the last two years of my five-year car loan because my overtime pay was cut? I have a feeling they wouldn’t be too sympathetic and would say that I should have planned for that possibility.

GM and the other car makers, contrary to opinion, have excellent financial people. Although some of the current problems were unforeseeable, a balance of focus on the long-term and the short-term business conditions could have solved many of the current problems. The UAW will work with GM to solve the unfunded liability problem; there isn't any choice, and it’s the responsible thing to do. However, it's not greed to expect to retire and have the benefits that you worked for and were promised all of your working life delivered to you. I keep my promises; GM needs to keep theirs.

 
At 9/10/2007 6:51 AM, Blogger Walt G. said...

Shouldn't the chart show the spouses of the current workers (or remove the spouses from the retirees' column) to make a direct comparison?

 
At 9/10/2007 7:02 AM, Blogger Mark J. Perry said...

From Haglund's article it's "UAW retirees and SURVIVING spouses." I've changed the graph to reflect that description.

 
At 9/10/2007 7:54 AM, Blogger Walt G. said...

Thanks. I realize the graph is from a common source--I see it a lot. I believe the results are graphically misleading, but it's not your fault.

I meant that current employees AND spouses should be compared with retirees AND spouses. Or, compare current employees WITHOUT spouses and retirees WITHOUT spouses. In my opinion, the same criteria should be used for both columns for a valid comparison. I would not make the graph that way unless I had a hidden agenda or wanted to visually magnify the difference. Of course, that does not mean a significant problem does not exist. It does, and it's huge.

 
At 9/10/2007 8:02 AM, Anonymous Anonymous said...

Fair or not, the GM executives, Board of Directors, and shareholders should have thought about the future implications before they obligated GM to offer that benefit to non-workers.

 
At 9/10/2007 8:16 AM, Blogger james said...

Let us not forget that Lee Iaccoca used all of those "dependent" American employees to justify his unprecedented financial government bail out back when Chrysler was facing certain bankruptcy in 1979. In my opinion this was more destructive to the auto industry than anything else in history. Here was the free market at work deciding that we needed to let go of Chrysler and allocate more resources to the other auto makers, keeping them more globally competitive, and what do we do? Step in, interrupt the process with tax payer money! Sorry if I have a hard time feeling sorry for these companies when their real ailment is delusions of grandeurs.

 
At 9/10/2007 8:18 AM, Blogger Walt G. said...

GM's not the only one with this demographic problem. Most governmental units from the township level up to the federal level (Social Security . . .) have the same problem. Aging baby-boomers are causing a financial strain everywhere. Almost none of the huge liability is funded. Don't think these problems will not affect you.

 
At 9/10/2007 1:20 PM, Anonymous bob wright said...

The chart says Retirees and Surviving Spouses"

or

spouses who survived a deceased retiree.

In other words, the chart compares households receiving insurance.

It looks consistent to me.

 
At 9/10/2007 1:58 PM, Blogger Walt G. said...

They are counting employees as 1 even though many current workers have living spouses. The retirees are being counted as 1 retiree and 1 possible surviving spouse. It's not retiree OR surviving spouse. Accordingly, the current number is low. Look at it this way: If half of the current hourly workers are married the number should be about 270,000 (180,000 x 1.5).

On another note, GM is not an anomoly when it comes to unfunded health-care liability. Current estimates of unfunded liability for state and federal employees is 1 trillion dollars for 25 million government employees. Everyone is going to pay for the demographic bubble, longer lives, and more expensive health care. This is not a UAW "greed" issue.

 
At 9/10/2007 2:54 PM, Blogger Mark J. Perry said...

Survivng spouse implies the other spouse has died. I think the UAW and GM are counting "social security numbers" to arrive at the number covered by insurance. Some current workers have spouses covered, and some retirees have spouses covered, and some of both groups are single. If a UAM member dies, and his/her spouse is covered, that counts as one social security number.

If the UAW/GM are counting the number of insurance policies, then I think the comparison is valid between the two groups.

 
At 9/10/2007 3:04 PM, Blogger Walt G. said...

I'll see if I can dig up my sources. They are not confidential, but they are on a GM employee-only website. My memory isn't as good as it used to be. I recollect that GM used workers on the payroll (without spouses or dependents--unless they worked for GM) and added the retirees AND surviving spouses for the other number. I'm not sure how the other automakers tally their numbers (the graph is for all the automakers).

 
At 9/10/2007 3:50 PM, Blogger Walt G. said...

Here's a detailed chart that contains end-of-the-first-quarter 2007 data of employees and retirees broken down by company and status. The active members are the number paying union dues, so spouses and dependents are not included unless they also pay union dues. I tried to post the table, but it did not work. Does anyone else have anything more accurate?

www.uaw.org/barg/07fact/fact02.php

 
At 9/10/2007 4:12 PM, Blogger Walt G. said...

The chart is wrong and mislabeled . The retirees’ column is actually a total column, which includes the current workers. The numbers in the chart match the UAW information from the link above exactly.

 
At 11/25/2008 7:53 PM, Anonymous Anonymous said...

It seems that the Big 3 made the same mistake/miscalculation as the government has made with Social Security. They did not make sure that they were placing enough money in trust to insure the funding of benefits, assuming that there would always be enough workers to fund benefits from current income. Both are cases of mismanagement and failure to take reasonable financial steps to meet the obligations made. Benefits for retirees should be largely funded by the work that they do and not the work of those that work after they are retired.

 
At 2/22/2009 6:28 PM, Anonymous Anonymous said...

very funny that the libs turn this into a national healthcare debate.

Unions have destroyed GM

 
At 4/21/2009 10:05 AM, Anonymous Anonymous said...

Let's not make this about Unions vs. corporations or lib's vs. con's. Both sides have an obligation to look at the picture and decide where to go from where we are today, not get all whiney about who did what 30 years ago.

The fact is, the current equation does not work and cannot work in the future. We cannot give full benefits to someone who works for 30 years and lives 30 more years in retirement. The current system wasn't built around that.

Whether it's GM or Social Security, we need to scale back on what retirees get since they're living longer, or else the Fed will soon face what GM and others already do.

...or we require workers to work longer in order to receive full benefits - say 45 years instead of 30.

 

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