No to VEBA! Defend UAW Health Care!

Support Socialist Appeal – Subscribe or make a Donation!

As contract talks between the UAW and Chrysler/Cerberus continue in Detroit, the Big Three Auto bosses are preparing the ground for renewed attacks on the health care front. Citing “legacy costs” and declining profitability, they are offering up a new solution to the UAW that will supposedly increase the company’s bottom-line while maintaining workers’ benefits at the same time. But as auto workers have learned the hard way over the past two decades, the only solutions that come from the Big Three are ones that only benefit the bosses – maintaining profits at the expense of lightening workers’ wallets, increasing our work hours and bloating our health care bills. The new “solution” on offer, VEBA, is a direct threat against auto workers’ health coverage.

It has emerged that in addition to asking for two-tier wages and an overall wage cut, the bosses may push for the conversion of the retiree health plan from a standard company-administered plan to a UAW-administered plan. VEBAs (Voluntary Employee Benefit Association) will probably differ in their details from company to company, but they work in the same general way. Like health care plans many workers have now, a VEBA relies on a stock market fund for its finances. The big difference is that a VEBA plan would be administered by the UAW , and any shortfall in the fund’s finances would have to come out of the union treasury.

The company gives a one-time contribution to start up a stock market fund, the income from which will pay for the health plan. But the company is only required to give once, and in fact under certain types of VEBA plans, the company can take money out of the fund in order to pay for capital costs. In 2000, GM took $1 billion from one of its VEBA funds in order to invest in Suzuki and GMAC, GM’s finance arm. After the company gives the fund its starting capital, it is up to the fund to make a profit on the unpredictable stock market in order to pay what are now the union’s HMO bills.

The problem is that even under the best market conditions not all stocks do well and portfolios can lose money. When profit-making companies lose money on the stock market, they can use equity to borrow money from the banks to pay off the losses and start over again. But a union only draws in dues. It is not a profit-making institution. It may therefore be difficult to borrow large sums of money from the banks to make up for shortfalls. The UAW could be put in the position of having to dip into other important funds if the VEBA goes broke. Any shortfall would come out of the union treasury or lead to higher out-of-pocket costs for the membership. What is worse, it would put the unions themselves in the divisive and demoralizing position of having to cut their own members’ benefits.

VEBA plans have already been instituted at Ford, Detroit Diesel and  Caterpillar, where it was imposed on the UAW after the last strike. The latter two VEBA plans have already gone broke, causing premiums, co-pays and drug costs for UAW retirees to skyrocket – a crushing financial burden. Take the example of retiree and former President of UAW 751, Larry Solomon, as quoted in Labor Notes: “I knew I had paid for my lifetime health care coverage through the wage and benefit structure of all the previous contracts I worked under, but this agreement vetoed them all. My wife and I will be paying $118/month premiums in 2005, and these will increase each year to a projected $332 by 2010.”

VEBAs are useful – from the employers’ perspective – in that they shift health care costs away from the companies and entirely onto the shoulders of the workers and our unions. This is why the Big Three have shown such an interest in a VEBA “solution”. By making a one-time contribution to the fund, the companies can abandon their health care obligations and turn a big profit by eliminating this huge cost. The burden will instead be put on auto workers and the UAW, a $118 billion burden to be exact. This is living proof that everywhere and always, the interests of the capitalists and the working class are diametrically opposed. There can be no such a thing as a “partnership” between the working class and the bosses. In reality the policy of “partnership” between the UAW and the Big Three serves only to subordinate auto workers’ interests to those of Ford, GM and Chrysler.

We must take this perspective as our starting point if we are to fight against concessions, let alone fight to recover the gains lost in the past two decades. If their objective is truly to defend the membership, the UAW leadership needs to understand that there cannot be any question of being in “partnership” with the Big Three. More than ever, a class-conscious leadership and rank and file is needed. The Industrial Workers of the World (IWW), pioneers of the U.S. labor movement in the early part of the last century had a maxim: “The working class and the employing class have nothing in common.” This is the basic idea upon which our trade unions were founded, enabling them to struggle to improve the wages, working conditions and benefits of the entire working class.

Chrysler has made it clear that if it does push for a VEBA at the bargaining table it would “only” seek to do so for retirees. This is despite the fact that retirees naturally expected that their benefit deductions would pay for their health care during retirement. What is more, UAW retirees cannot vote under the bylaws, even though they are directly affected by contractual provisions for retiree health care and pensions. Therefore, unity between UAW retirees and active workers is absolutely necessary to defeat any contract offer that contains VEBA. Today’s active workers are tomorrow’s retirees!

VEBA is the bosses’ “solution” to the health care crisis. Ultimately, the only workers’ solution to the health care crisis is through a socialized, national health care system, abolishing private health care and the HMOs. But we will not win this merely by appealing to the Big Three to “sign on” to the idea, which is the current UAW policy. Even if the Big Three were all to endorse national health care, what would this accomplish? All that they could do would be to throw a few lobbyists with briefcases full of cash at a handful of Congressmen and women in the “hopes” of getting “something” done.

Until we have a socialized national health care system, we must fight to maintain the health benefits we have now. UAW retirees paid into the Chrysler-run health care plan for decades, believing that those contributions would pay for their health care after retirement. Active workers who will be voting on this contract will have to make a choice as to who will have to shoulder their future health care costs – the bosses or themselves. Chrysler will of course again pose the issue as one of life or death; ‘if you don’t accept VEBA, we’ll go bankrupt and you won’t have a job anymore’. The response has to make it clear that the UAW’s first and only responsibility is to its members’ wages, conditions and benefits, not the profit margins of Ford, GM or Chrysler. And until the UAW is prepared to stand up and say so, the never-ending spiral of concessions will continue.

Want to get involved? Drop us a line to join the fight for socialism in our lifetime:

Donate to Socialist Revolution


Click to Subscribe to Socialist Revolution Magazine


Socialist Revolution is the official publication of the US Section of the International Marxist Tendency.
Contact us at or 646-791-6279