Two Tier Healthcare in Canadian Auto

Well attended meetings of GM of Canada (GMC) retired workers were held in early August to inform them about the proposed settlement between them and GM of Canada regarding the future of retiree healthcare benefits. The settlement will put in place the Healthcare Trust (HCT) agreed to in the 2009 contract negotiations. The administrators of the HCT will oversee and allocate these retired workers' healthcare benefits.

The retirees listened with concern as they were told that with the funding GM is providing to the HCT benefits would be cut to between 77% and 84% of their current level if the fund is to be sustained indefinitely. Failing that the fund will eventually run out of money meaning all healthcare benefits will end. At the time of this writing it remains to be seen what benefits will be cut and to what extent.

A principal justification cited for establishing the HCT is that it will sustain healthcare benefits if GM goes bankrupt. But the creation of the HCT makes it even more unlikely that will ever happen. GM of Canada President Kevin Williams made this rather obvious earlier this year when he stated that the HCT will reduce Canadian labour costs by over $16.00 an hour. This revelation explains why GM has repeatedly told the CAW that future investments in Canada are contingent upon the HCT being finalized. It also showed once again how GM has successfully used its control over investment decisions to extract endless contract concessions from an acquiescent CAW.

The immediate effects of the finalization of the HCT will not just involve big new cuts to retiree healthcare benefits. The most significant effect will be the establishment of two tier healthcare benefits at GM of Canada. Active workers will not endure the cuts that will come with the HCT meaning their healthcare benefits will remain as they are while retiree healthcare benefits get sharply reduced. This two tier arrangement is especially devastating for retirees because they need their healthcare benefits more than active workers. It is also morally indefensible because GM retirees fought the contract battles that got the healthcare benefits all GM workers enjoy.

The consequences do not end there. Retired GMC workers will be hit by these new cuts just as they are experiencing steadily declining real incomes due to the loss of cost of living adjustments on their pensions and due to the healthcare benefit concessions negotiated in 2008 and 2009. Increasing financial hardship will go hand in hand with the indignity of having healthcare benefits very inferior to those active workers get.

The finalization of the HCT is also bad news for the continually shrinking active workforce at GM. With the HCT they have another reason to put off retirement for as long as they can because retirement will mean living with less than it did before. GM workers who ``retire`` will become even more inclined than they already are to get a new job to compensate for their steadily declining retirement incomes.

Another thing must be understood. Two tier healthcare benefits at GMC mark yet another break from pattern agreements in the Canadian auto industry. There will be no two tier healthcare benefits at Chrysler of Canada because the HCT there is much better funded. Nor will there be two tier healthcare benefits at Ford of Canada because there is no HCT there. So GM of Canada retirees are on their own in this regard. They need mobilize around the 2012 contract negotiations to compel their leadership to negotiate gains elsewhere sufficient to make up for the big cuts they are about to endure. Active workers at GMC must be in full support of them.