GM’s cave-in on health signals trouble for industry seeking cuts

Bloomberg

If General Motors (GM) Co’s negotiations with the United Auto Workers (UAW) are any indication, Detroit’s automakers may not have a prayer in their effort to rein in rising healthcare costs.
As GM was nearing the expiration of its labor contract with the union, the carmaker sought to have hourly workers pay 15 percent of their health-care costs, according to people familiar with the talks. But by the time the company presented the UAW with a deadline offer, GM walked back the proposal and called for keeping contributions steady at about 4 percent, said the people, who asked not to be identified discussing private discussions.
The quick cave on health costs still wasn’t enough to ward off a walkout by 46,000 GM employees. The episode is a bad omen for Fiat Chrysler Automobiles NV and Ford Motor Co, since the UAW typically tries to pattern contracts reached with Detroit carmakers after one another.
Ford is expecting the insurance bill covering its 56,000 hourly workers to exceed $1 billion for the first time next year, Bloomberg News reported in March.
“Asking for 15 percent more towards the health care without handling the other issues the UAW wanted was an unusual tactic that didn’t work,” said Arthur Wheaton, director of the Worker Institute at Cornell University.
“It may have actually encouraged the membership to say: ‘You know what, if they don’t want to be serious, we’ll go out on strike.’”
Healthcare has long been considered the third rail of automotive contract talks, with workers zealously clinging to their plans. They see them as hard-won benefits that help make up for the wage concessions and jobs given up over a decade ago when GM and Chrysler went bankrupt and Ford went through wrenching restructuring.
The three companies’ hourly employees contribute between 3 percent and 4 percent to
their coverage, compared with 29 percent for the average American worker, according to a October 2018 study by the Kaiser Family Foundation.
In an unusually detailed description of what it offered shortly before the strike began, GM said its workers will “retain nationally-leading healthcare benefits.” Representatives for the company and the union declined to comment for this story.
The preoccupation of the UAW’s chief GM negotiator with healthcare in the first two days of the union’s first national strike against the automaker in 12 years underscores just how significant medical benefits are for both sides.
The company confirmed to the UAW that it cut off coverage for its striking workers, Terry Dittes, the vice president of the union’s GM department, wrote in a letter obtained by Bloomberg. UAW attorneys are looking into whether the company is allowed to suspend coverage immediately, or if it was supposed to keep footing bills for members until the end of the month.
The carmakers contend the packages they’ve been providing put them at a disadvantage against rivals with non-unionised factories.
Without changes in coverage, the growth in healthcare costs over the life of the next contract would be the equivalent of a $3 hourly wage increase.
The generous plans negotiated by unions also are making their way into Democratic presidential candidates’ arguments over the future of US healthcare policy.