Two-Tier Healthcare for GM Workers

Two Tier Healthcare
By Bruce Allen

Well attended meetings of GM of Canada (GMC) retired workers were held in the first week of August to inform them about the proposed settlement between them and GM of Canada with regard to the future of retiree healthcare benefits. This settlement will put into place the Healthcare Trust (HCT) agreed to in the 2009 contract negotiations. The administrators of the HCT will administer and allocate these workers’ healthcare benefits.

GMC retirees listened with concern as they were told that with the funding GM is providing to the HCT benefits would be cut to between 77% and 84% of the current level if the fund is to be sustained indefinitely. Failing that the fund will run out of money in the future meaning all healthcare benefits will end. At the time of this writing it remains to be seen which benefits will be cut and to what extent.

A principal justification for establishing the HCT is that it will sustain healthcare benefits in the event GM goes bankrupt. However the creation of the HCT makes it even more unlikely that will happen at any time in the future. GM of Canada President Kevin Williams made this rather obvious earlier this year when he stated that the HCT will reduce Canadian labour costs by over $16.00 an hour. This revelation also explains why GM has repeatedly told the CAW that any future investments in Canada are contingent upon the HCT being finalized. It also demonstrated once again how GM has successfully used its control over investment decisions to extract never ending contract concessions from an acquiescent CAW.

The immediate effects of the finalization of the HCT will not just be big new cuts in retiree healthcare benefits. The most significant effect will be the establishment of what amounts to two tier healthcare benefits at GM of Canada. Active workers will not experience the cuts that will come with the HCT meaning their healthcare benefits will remain as they are while retiree healthcare benefits get sharply reduced. This two tier arrangement is particularly devastating for retirees because they need their healthcare benefits more than active workers. It is also morally indefensible sinces GM retirees fought the contract battles that got the healthcare benefits GM workers enjoy.

The consequences do not end there. Retired GMC workers are about to be hit by these new cuts at the very same time as they are experiencing steadily declining real incomes owing to their loss of cost of living adjustments on their pensions and to the healthcare benefit concessions negotiated in 2008 and 2009. Increasing financial hardship will go hand in hand with the indignity of having healthcare benefits very inferior to those active workers get.

Nonetheless the finalization of the HCT is bad news for the continually shrinking active workforce at GMC. With the HCT they have even more reason to put off retirement for as long as they can because retirement will mean living with less than it did before. Consequently GM workers who “retire“ will be even more inclined than they already are to get another job to compensate for their steadily declining retirement incomes.

One more thing must be understood. Two tier healthcare benefits at GMC marks yet another departure from having pattern agreements in the Canadian auto industry. There will not be two tier healthcare benefits at Chrysler of Canada because the Chrysler HCT is much better funded. Nor will there be two tier healthcare benefits at Ford of Canada because there is no HCT there. GM of Canada retirees are on their own in this regard. It will be up to them to mobilize around the 2012 contract negotiations to compel their leadership to negotiate gains sufficient to make up for the major losses they are about to experience.

August 6, 2011