Just months after locking up an innovative deal to manage the crushing costs of medical coverage for the Big Threes retirees, the United Auto Workers union is revving up a $50 billion trust fund that could liberate the struggling automakers from one of their most burdensome expenses and prompt other employers to seek similarly creative solutions to their own retiree medical issues.
The union-run fund, known as a voluntary employees beneficiary association, or VEBA, is quickly taking shape, with several key outsiders recently tapped to help oversee the health-care trust. In addition, General Motors Corp., Ford Motor Co. and Chrysler LLC have been tweaking their balance sheets so they can fund the VEBA, which will allow them to offload billions of dollars in medical benefits owed to hundreds of thousands of retirees. And on April 28, Ford gained preliminary approval from a federal judge over its VEBA agreement with the UAW, making it the last of the automakers to gain such court approval.
Its a confluence of events that could affect more than the Big Three, the UAW and the retirees. This VEBA or at least the appeal of management finding relief from providing retiree medical care has many corporations closely watching the developments.
Settling these obligations is a top priority for scores of companies, said Stephen Parahus, senior health-care consultant at Towers Perrin in New York. A VEBA may not be the exact answer for every company in every one of these industries, but what the automakers are doing is still highly relevant.