Unions agreed to take on retirement health care via VEBA's during the last round of automaker contract negotiations. Companies committed billions to these innovative arrangements, where unions hold responsibility for retiree health care coverage.
GM and Chrysler offered new plans. None have been adopted, yet. Ownership falls out as:
Chrysler
Union 55%
Fiat 35%
Government and bondholders 10%
GM
Government 50%
Union 39%
Bondholders 10%
Unions end up with significantly greater chunks of the company than expected. Financial experts wonder why. VEBA's are part of the answer. The NYT reported:
The government wants the union to accept company stock to finance half of G.M.’s $20 billion obligation for retiree health care.
Chrysler would give the union a 55 percent stake to cut its obligations to the health care trust in half. The deal suspends cost-of-living pay increases, limits overtime pay and reduces paid time off. It also eliminates dental and vision benefits for retirees.
What about employee health insurance? Will that shift to the union under Obama health care reform? Highly likely.
Other oddities? The union will be on both sides of the negotiating table. It also would manage billions in funds for pensions and employee/retiree health care coverage. Who will invest their ample funds? I smell a PEU, private equity underwriter. They are the solution to every problem, right? President Obama believes so.
