As many of you know (and have commented prolifically on), the Big 3 carry an enormous burden that import competitors like Honda and Toyota don't: unionized retiree health care costs. GM, for example, had $81 billion in salaried and hourly retiree health care obligations at the end of 2005. Chrysler is on the hook for $19 billion. That's no small amount when you're trying to turn a company around -- or in this case, three companies. In fact, the term used for it is indicative of just how health care is regarded: "liability."

The UAW will be negotiating a new labor contract agreement this summer, and one of the far-reaching ideas being considered is for the UAW to take over responsibility for health care liabilities. The Big Three would pay a huge lump sum (many billions), but afterward their obligation would be capped at some agreed-upon and competitive number. Tony Faria, an industry expert, said "The unions fully realize these companies are in trouble. The auto companies would provide some major amount of funding. From there on, they'd be paying at a known rate, rather than an ever escalating rate."

The setup is called a "voluntary employee beneficiary association," and there are models for it. Goodyear set one up last year in an agreement with the United Steelworkers, and GM already uses VEBAs for some of its retiree costs. It isn't a done deal, but it is something being considered. The UAW understands how serious the situation is, and could be prepared to do the previously unthinkable in order to gain other guarantees and create a better competitive climate for the domestic makers.

[Source: Christian Science Monitor]