Blame Is Put on Management, but Hourly Workers, Retirees Face
By Matthew Dolan
The Wall Street Journal
-- President Barack Obama's recovery plan for General Motors
Corp. and Chrysler LLC appears to take aim at union retirees, a
usually reliable Democratic constituency.
After studying the plight of the companies, the president's auto
task force concluded GM and Chrysler's survival is dependent on
greater concessions from the United Auto Workers union because
the cost of funding retiree benefits had become unmanageable,
especially given the downturn in global auto sales.
In his address Monday, Mr. Obama laid blame for GM and
Chrysler's financial ills largely at the feet of the management
teams at those companies. He called on hourly workers and
retirees at the companies to be ready to accept more sacrifice
if they hoped to keep their employers afloat.
The UAW appears to be standing firm that its members have made
substantial concessions compared with other stakeholders. UAW
President Ron Gettelfinger on Monday declined requests for
interviews, but a person close to him said the union boss is
determined not to consider further concessions unless
bondholders and creditors agree to givebacks that cut GM's and
Some Democratic lawmakers have offered support for the union. On
Monday, Sen. Carl Levin (D., Mich.) acknowledged the union would
have to agree to more cuts to retirees' benefits, but added that
investors in GM, not employees, would have to sacrifice the
most. The three Detroit
auto makers provide health care for more than one million
Americans, including union retirees and their dependents. In
2007, the union agreed to allow GM, Chrysler and Ford Motor Co.
to pay billions of dollars into a trust fund, known as a VEBA,
or voluntary employee beneficiary association, that the union
would manage and use to cover the cost of retiree health care.
Under the terms of the bailout loans GM and Chrysler have
accepted from the federal government, they are supposed to
renegotiate the VEBA agreements so they can put a combination of
cash and stock into the funds or equity. GM is obligated to
contribute about $20 billion in cash, in addition to $16 billion
in funds it already committed, and Chrysler about $10 billion.
The task force found that GM's own plan to deal with retiree
health care and pensions grows "to unsustainable levels,
reaching approximately $6 billion per year in 2013 and 2014." To
pay those bills, GM would need to sell 900,000 additional cars a
year, according to the panel. GM sold 8.35 million vehicles
around the world last year.
A union local president in
said more could be done to reach a compromise on retiree health
care. But the union leader who represents GM workers warned if
the auto makers step back from their obligations to retired
workers, the remaining cost of their health care will not go
Clem Wittman, 68 years old, spent three decades working the
assembly line for GM, building Monte Carlos and Skylarks in
Kansas City, Mo.
On Monday, he watched as Mr. Obama outlined his plans for
steering the future of GM and Chrysler without explicit mention
of the retirees. "It was scary because he never mentioned the
retirees and legacy costs," Mr. Wittman said. "What 85-year-old
can go out and get another job?"
He takes 11 medications, including some which cost more than
$100 a month, all covered by GM health-care programs. Mr.
Wittman said that for 30 years he paid for those benefits and
shouldn't be asked to give them back.
—Sharon Terlep and Corey Boles contributed to this article.
Write to Matthew Dolan at