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Critics Charge Court Order Raises Questions About Secrecy of GM's Planned Retiree VEBA
By Nora Macaluso
Copyright 2008,
The Bureau of National Affairs, Inc.,
Washington, D.C.
LANSING, Mich.--A Dec. 27 ruling by a district court judge in Michigan that information about General Motors Corp.’s plans for setting up a retiree health care trust may be kept confidential is raising questions from some retirees, critics, and attorneys, who say it could prevent workers and retirees from getting needed information about the security of their retirement benefits (United Auto Workers v. General Motors Corp., E.D. Mich., No. 07-14074, order issued 12/27/07).
Judge Robert Cleland of the U.S. District Court for the Eastern District of Michigan issued a protective order indicating that documents, testimony, and other material that would cause “annoyance, embarrassment or oppression” to GM retirees or employees or United Auto Workers union members may be kept confidential, viewable only by those with direct connection to the trust.
The order was issued in response to a lawsuit filed by the UAW and a group of retirees last September asking the court to review the agreement, which is part of a four-year contract reached between the union and the company in September (187 DLR AA-1, 9/27/07). The contract calls for the establishment of a voluntary employees' beneficiary association (VEBA) to be funded by the company and run by the union.
The suit, actually aimed at obtaining court approval of the VEBA, was brought as a class action on behalf of GM retirees. It asks the court to declare that GM cannot terminate or modify retiree health care benefits provided for under collective bargaining agreements. The lawsuit was filed under the Labor-Management Relations Act and the Employee Retirement Income Security Act.
Although a similar suit was filed, and a similar decision issued, in connection with GM's establishment of a VEBA trust to handle health care costs for a smaller group of retirees in 2005 (202 DLR A-10, 10/20/05), “this is a much larger case,” said Jerry Tucker, a retired GM worker and longtime UAW dissident who has been a vocal critic of the new contract and had urged the union to reject it because of the VEBA (181 DLR A-2, 9/19/07).
GM Cites Competitive Concerns.
“The real question here is, what's to be kept secret?” Tucker said Jan. 7. “We're talking about shifting billions of dollars to run an insurance plan.” The ruling, he said, assures that there will be “no transparency whatsoever as to how the plan came together, what components and parts are involved, and ultimately how it operates.” Tucker told BNA he is circulating news of the decision to retirees and attorneys and is “waiting to see” whether any action will be taken.
GM spokeswoman Michelle Bunker said the information protected by the order includes “competitive” documents covering financial projections and future product plans that the company does not want shared with the general public. “It's essentially to protect competitive information of the company that would cause harm if it got into the hands of our competitors,” she told BNA Jan. 8.
Stephen Diamond, associate law professor at Santa Clara University and another VEBA opponent, does not buy that argument. “It's not like anybody cares what color paint they're going to put on their next models,” Diamond told BNA on Jan. 8. “What people care about is how much money they're going to require to fund the VEBA.”
Ellis Boal, an attorney who represented one of the objectors in the 2005 GM case, told BNA Jan. 9, “This is not sensitive financial information.”
Boal said the UAW also represents members at GM's competitors. However, he said, the terms of the convertible note provide that, if certain conditions are met, the union could end up as a major GM shareholder, meaning its loyalties to workers it represents at Ford and Chrysler could be called into question. “I think that's a problem for the union,” he said.
GM Cash Flow Key to VEBA Funding.
Diamond, meanwhile, has asked the Securities and Exchange Commission to investigate the VEBA process, arguing that GM's plan to issue a convertible note to help fund the trust is a risky one, and that employees were not given the chance to review the terms (195 DLR A-6, 10/10/07). As of Jan. 9, he said, he had not heard whether the agency would look into the deal.
“Basically, $7 billion in cash flow is going to have to go from GM to the VEBA” in addition to the assets that were pledged to set up the trust, Diamond said. “If that cash flow is at risk, then that upsets the whole apple cart.”
Diamond called “ridiculous” UAW President Ron Gettelfinger's claim that the VEBA would fund retiree health care costs for some 80 years.
“There's certainly no disclosure that was made to current workers or retirees in advance of the ratification vote that would have enabled them to conclude that he was right about the 80-year claim,” Diamond said. “The UAW provided only one side of the material. Now the court process, which is supposed to be a sort of substitute for collective bargaining for employees, isn't going to provide any disclosure.”
“Senior workers are being lured into retirement and buyouts because of promises of secure health care in retirement,” said Diamond. “There's no such beast in this VEBA.”
Diamond said the UAW filed the “faux lawsuit” on behalf of retirees friendly to its position in order to “impose the deal on existing and future retirees.” If details about the risks of the VEBA in the event of a GM bankruptcy became available, “it would trigger an internal debate within the UAW itself and in the retiree base about the effectiveness of this shift of retiree health insurance off the balance sheet of GM,” he said. “People would understand the issues we raised in the SEC complaint.”
GM's Bunker said the retirees in the lawsuit were “elected to represent the class, and they are definitely reviewing the proposals.” The group, she said “can choose not to accept it, or they can choose to accept it.” The parties are scheduled to reach a final settlement agreement by Jan. 31, and to file a motion for provisional class certification and preliminary approval by Feb. 11.
Diamond said he expects suits from retirees of Ford and Chrysler challenging those companies' VEBAs as well. “They'll each file a similar class action,” he said. Like GM, Ford and Chrysler “don't have enough money to fund their obligations,” he said.
Ford settled a similar lawsuit with the UAW on behalf of retirees involving its 2005 plan for a retiree trust (United Auto Workers v. Ford Motor Co., E.D. Mich., No. 05-74730, settlement approved 7/13/06); 137 DLR A-1, 7/18/06).
“In my view, this is going to blow up,” said Diamond. “This will blow up legally or politically. This should not stand. There ought to be congressional hearings. I think what we need is a national blue-ribbon commission to explore the issue of retirement from major public, industrial companies. This should not be sitting in a district court in Michigan, where GM and the UAW are both headquartered.”
Moreover, Diamond said, shifting the burden of health care to a trust “gives the UAW and GM an excuse to ignore the national health care debate. The whole problem here is that this is an attempt to fashion a private solution to a social problem.”
Calls to a UAW spokesperson and an attorney for the plaintiffs were not returned. |
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Thu Jan 17, 2008 2:40 pm |
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Dave Starr
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Several years ago, I went to the union hall and asked for a copy of the national and local agreements. I was told that I wasn't smart enough to understand them, and they union would tell me what I needed to know.
The "Contract Signing Bonus" that's paid when the union gets a new contract has union dues taken out of it. Some of my coworkers went to the union hall to ask why, and were told: "We got that for you. You owe us".
Looks like nothing's changed. |
_________________
I used to care, but I take a pill for that now.
Pushing buttons sure can be fun.
When a lion wants to go somewhere, he doesn’t worry about how many hyenas are in the way.
Paddle faster, I hear banjos. |
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Thu Jan 17, 2008 3:20 pm |
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