A MESSAGE TO UAW FORD RETIREES
From UAW President Ron Gettelfinger, UAW Vice President Bob King and the UAW Ford National Negotiating Committee
Dear Brothers and Sisters,
Two years ago we made a difficult decision to support limited reductions in retiree medical benefits for UAW-represented Ford retirees. That decision was intended to help secure your medical benefits for the long term by assisting Ford in addressing its significant financial difficulties. In that process, we insisted on protecting our most vulnerable retirees – those with pensions of $8,000 or less and a benefit rate of $33.33 or less – by exempting them from monthly contribution, deductible and co-insurance provisions.
This year, in bargaining for a new UAW-Ford National Agreement, Ford again approached us seeking further reductions in your retiree medical benefits. We have spent several months in difficult and complex bargaining with Ford on this subject. From the beginning we refused Ford’s demands for benefit reductions.
Ford argued they have the right to reduce or eliminate retiree medical benefits, as they have done with thousands of their salaried retirees. That issue could have been fought in the courts once the 2005 settlement expired in 2011. If Ford prevailed in their argument, they would have the legal right to modify or even terminate your medical benefits.
Needless to say, we argued strenuously that Ford does not have the right to modify your benefits, even after the expiration of an existing labor agreement. 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 to resolve the matter.
In addition, while we believe that Ford is both legally and morally obligated to pay retiree medical benefits, the company’s obligation is largely unfunded. Continued benefits depend on Ford’s financial health. If Ford, which lost $12.6 billion last year, 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 Ford retirees in that position.
Instead, we insisted that Ford agree to a funding plan that would secure retiree benefits for the long term. We are pleased to report we have achieved that objective.
We have obtained financial commitments from Ford, totaling over $15.4 billion, to pay for retiree health care benefits. This includes Ford’s agreement (subject to ratification and court approval) to contribute $13.2 billion to establish a funding mechanism that will protect your retiree medical benefits – at current levels – through establishment of a Voluntary Employee Beneficiary Association (VEBA).
The VEBA will operate as an independent trust and will become operational in 2010; until that time, Ford will continue to pay for retiree health care benefits, at a projected cost of $2.2 billion.
Active workers will contribute to the VEBA through COLA deferrals and by continuing to contribute the cost of a foregone wage increase in 2006, and the value of a wage increase otherwise payable in 2008. Along with all UAW Ford active employees, we are united in our desire to support and protect our retired brothers and sisters.
In addition to securing health care funding through the new VEBA, we put a high priority on improving pension incomes for current retirees. We are proud that the tentative agreement includes improved pension benefits for all classes of retirees, together with lump sums in all four years of the agreement. 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 the health care changes negotiated in 2005, the additional monthly contributions, co-pays and deductibles have been difficult for many retirees and their families. We entered these negotiations determined to safeguard the health benefits and economic security of UAW Ford retirees, so that you can look forward with confidence, not uncertainty. We are proud that we have been able to accomplish that goal to protect you and your family.
In grateful solidarity for your contributions to our union,
Ron Gettelfinger, Bob King and your UAW Ford National Negotiating Committee