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Health Care costs in the U.S. are driving the costs and decisions of nearly everything else now. Companies like GM which have obligations negotiated over past decades in this area are finding these costs strangling as they have to compete with newer manufacturers that build plants in non-union states or have contracts negotiated more recently that manage health care differently. GM cites a $10 per hour per employee cost difference as a result.
Enter the most recent negotiations with the UAW. GM has managed to off load responsibility for these costs to the Union. According to The Washington Post,
"At the core of the new deal is the transfer of retiree health-care payments from GM to the UAW. GM will pay an estimated $35 billion into a trust designed to appreciate in value and pay health-care benefits for retired workers for at least the next 80 years, the union estimated. In return, GM is able to unload a $51 billion burden in retiree health-care obligations from its books, enabling the troubled company to borrow money more easily and move more nimbly against competitors"
Here's a way to read that. GM pays the UAW a metric buttload of cash to make this problem go away. They turn a huge and growing liability into a fixed one. They're betting the health care problems in this country will not be fixed in a way that would lower their cost of providing them any time soon. The UAW, on the other hand, is betting that they can invest that cash more wisely than GM and cover these costs while at the same pushing ever harder for health care reform in Congress.
1. GM doesn't believe that health care reform is a safe bet right now, and that costs to provide coverage will at least continue and likely grow.
2. The UAW thinks either than it can better invest than can GM (though GM has its own lending division) or else that not only is health care reform coming in the near term, but that the reforms will come in a way that will let them take advantage of it and migrate their coverage.
What's fascinating about that last bit, is that if GM tried to change the health care provided to whatever plan congress comes up with, the UAW would likely fight it tooth and nail until it was very well proven. Instead, the UAW which tends to support public provided health care and other social programs, will now be in the position to decide on behalf of its membership when its time to switch.
That makes the Union into the Management in terms of benefits, with its own bank accounts directly tied to what it can save on providing health care coverage. Fascinating. If you work for GM, and the UAW decided to switch to an HMO you don't like, who do you strike against?
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