If General Motors' negotiations with the UAW are any indication, Detroit’s automakers may not have a prayer in their effort to rein in rising health care costs.
As GM was nearing the expiration of its labor contract with the union last week, the automaker 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.
GM's turnabout 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 and Ford Motor Co., since the UAW typically tries to pattern contracts reached with the Detroit 3 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 toward 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.’”
Health care 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 health care benefits.” Representatives for the company and the union declined to comment for this story.
Coverage cutoff
The preoccupation of the UAW’s chief GM negotiator with health care 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 on Tuesday that it cut off coverage for its striking workers, Terry Dittes, vice president of the union’s GM department, wrote in a letter to members. 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 automakers contend the packages they’ve been providing put them at a disadvantage against rivals with non-unionized factories. Without changes in coverage, the growth in health-care costs over the life of the next contract would be the equivalent of a $3 hourly wage increase.
