After Years of Labor Gains, Autoworkers Face Losses

A Ford plant in Louisville, where the Sport Trac is made. Ford, GM and Chrysler open labor talks Friday with the UAW. (By Brian Bohannon -- Associated Press)

Larry Boynton is slowly coming to a realization that would have been unthinkable for an American autoworker just a decade ago: that he will have to accept deep cuts in medical benefits or risk one day losing his job.

"We are almost understood that we are going to give up something, especially with health care," said Boynton, 56, a Chrysler worker from Detroit. "It's like they are slowing pulling the cover off you, and you got to be happy you got a little bit on."

On Friday, bargaining between the United Auto Workers union and General Motors, Ford and Chrysler is to open with a round of ceremonial news conferences in Detroit. As Boynton and other autoworkers look forward to a negotiating process that was predicted to last about two months, their expectations are as low as they have ever been.

The Detroit automakers, which collectively lost $16 billion last year, and investors are demanding what some have called a breakthrough agreement: a transformational labor contract that would slash costs and free up cash as the companies move through a dire period of restructuring and transition.

Some union members, after seeing their employers cut jobs, close plants and lose money, say they would rather give up some of their historically generous benefits than risk losing them if one or more companies go out of business.

"Something is going to be worked out here," said James P. Womack, who has written about changes in the American auto industry for more than 25 years. "The alternative is that all three of these companies can hit the wall. We've had quite a lot of experience with bankruptcies in the airline and steel industries. It turns out that unions don't get very much."

In what would be the most dramatic shift, the automakers are asking the UAW to consider creating and managing a special trust fund for health-care and other benefits for retired autoworkers.

Such a proposal would involve the automakers contributing lump-sum payments to the fund and leaving to the union decisions about investing assets and paying benefits.

By each company making one last, mammoth payment and handing responsibility to the unions, the automakers would dispose of more than $117 billion in projected costs, according to their figures. GM has 332,000 hourly retirees and a $68 billion post-retirement health-care obligation, about $50 billion of which is UAW-related. Ford has $31 billion in overall post-retirement liabilities. Chrysler owes $16 billion to $19 billion.

The automakers say that shedding those burdens would give them needed room to maneuver as they take on their more profitable rivals from Japan, including Toyota, whose U.S. sales are booming. Last year, GM spent $4.8 billion on health care, which the company estimates could have paid for four new vehicle plants, six new vehicle model lines, or renovation of 16 assembly-plant paint shops.

UAW workers have long enjoyed gold-plated health-care coverage, including no monthly or weekly premiums, and low costs for drug prescriptions and doctor visits.

Such guarantees date to the early 1950s, when U.S. companies and the powerful industrial unions like the UAW agreed to offer health care after a failed campaign by President Harry S. Truman to create a national health-care system.