The Constitutional Death of the UAW “Part Four”
by William Hanline
Cycle Repeats Itself
Have you heard of the “Cyclic Theory” in history? Some historians claim history eventually repeats itself. I find an irony in that theory; for as intelligent human beings wouldn’t you think we would learn from recorded history not to repeat the same mistakes? After reviewing court documents about the UAW/GM lawsuit, newspaper articles, even a UAW booklet printed and passed out to Big Three/ UAW retirees back in 1976, it is apparent corporate America has reinvented the old problem they experienced before. The problem or burden of legacy cost for retirees and their healthcare on American corporations.
In 1973 when the union negotiated language for thirty and out in Big Three contracts the UAW set the trend in organized industrial America that would allow workers to retire before reaching age 65. UAW President, Leonard Woodcock presented a booklet to UAW members in 1976. It explained how the union was able to negotiate improvements in retirees’ benefits. Yes, improvements even though the Big Three suffered huge losses from high gasoline prices, and poor sales of gas guzzling cars they were building at that time. Additionally, the booklet reported the effects inflation had on retirees’ healthcare and economics in general, not the automakers but the retirees! Furthermore, lest not forget, Chrysler’s request for a bail out from congress. Even though the UAW negotiated a six year reprieve from negotiating any more thirty and out language the union was still able to live up to its Constitutional commitment to fight for economic and social justice for its members, retirees and communities. In fact, Woodcock wrote in the forward of that booklet. “We cannot be committed to a mandated course which could embroil us in litigation.” Funny thing, thirty years later the UAW is joining GM in a non-adversarial lawsuit that could prevent retirees from going to court against the automaker for reducing their benefits. What is this sudden profligacy exhibited by Gettelfinger and Shoemaker (the Cooperation Partners) toward lifelong benefits for UAW retirees? Especially, since they know the UAW won a motion in U.S. district court on December 27, 2005 that prevents ArvinMeritor Inc. from changing retiree health-care benefits. The purpose of this letter is to explain the wherefores and whys and to encourage every GM retiree to file an objection to the UAW/GM Settlement Agreement before the February 13, 2006 deadline. More importantly, to ask retirees to join with Mr. Leroy H. McKnight’s efforts to protect retirees’ legal rights to post retirement (vested) benefits.
Nature of the Lawsuits
First, do not conflate the UAW/GM lawsuit with Mr. McKnight’s lawsuit for they are two different creatures.
1) The UAW/GM lawsuit arises from General Motor’s decision to unilaterally (with out bargaining with the UAW) to modify retirees’ healthcare benefits. The UAW alleges in the lawsuit that hourly healthcare benefits in retirement are VESTED and unalterable. However, before the lawsuit was filed the UAW and GM negotiated a Memorandum of Understanding (MOU), known as the Settlement Agreement (SA), which was ratified by active working GM-UAW workers. The circuit court judge did not rule on the initial purpose. However, the case changed to get the judge’s rubber stamp of approval of the new Settlement Agreement. The new MOU will cost the retirees’ more for benefits and prevent them from suing GM during the life of the SA.
2) The McKnight lawsuit arises from the method the UAW and GM are using to seek relief for GM from retirees’ healthcare cost. The UAW is literally helping GM accomplish the latter without GM filing bankruptcy. Bankruptcy laws would allow GM to reduce retirees’ benefits without all the procedural safeguards and consequences provide by law. Mr. McKnight is trying to intervene on behalf of all retirees’ rights to receive unaltered benefits and be able to sue GM if the company does reduce the benefits.
The following are various reasons Mr. Mark Baumkel, Mr. McKnight’s counsel, recorded in a brief filed December 27, 2005 in opposition to the December 22, 2005 order reached by Judge Robert E. Cleland to temporarily approve the Settlement Agreement reached by the UAW and GM, until a fairness hearing is held March 6, 2006.
I) Adequate Notice of Settlement of Class Action
Did you receive notice of the class action taken by the UAW? In other words, did the UAW ask all retirees if they wanted to be a member of the class action before the class was established?
Timely and appropriate notice to absent members or those who do (did) not appear before the court is required by the claimants in order for the class to be considered a class. UAW failed to contact all GM retirees before filing the lawsuit. According to courts’ decisions, sufficient notice of all class members is required. If not the results could be the information presented to the court can be misleading and could omit certain information to retirees who were not included in the establishment of the retirees’ class. Furthermore, it would not allow retirees who did not participate in the establishment of the class opportunity to address concerns and have those concerns addressed in the lawsuit. If you are a retiree and you did not receive notice or feel, your concerns have not been addressed by the UAW/GM lawsuit or in the Settlement Agreement and by their counsels, then you need to file an Objection and join Mr. McKnight by contacting his attorney.
Mr. McKnight did attend the hearings that established the class and he was not allowed to address the court even though he had retained counsel.
II) Inadequate Counsel During Negotiations
The December 22, 2005 litigation represented three parties, 1) General Motors Corporation. 2) Employees of GM represented by the UAW. 3) and GM retirees. A settlement agreement was reached in October of 2005, which led to the MOU. However, the negotiations were between GM and Current employees (UAW). According to Mr. Baumkel there was no evidence in thousands of documents filed to date that shows the Legal counsels hired to represent GM and UAW’s newly negotiated Settlement Agreement or MOU ever participated in the negotiations between GM and UAW. Nor did they accomplish one cent in improvement in benefits for the retirees during negotiations or afterwards.
GM and the UAW, who had conflicting interest in the lawsuit secured the counsel for the retirees. Therefore, the counsels were hired for the sole purpose of expediting a DEAL already made between those conflicting parties, GM and UAW. What is more, General Motors Corporation will pay the counsel’s legal fees. All of this was done to circumvent the initial purpose of the lawsuit that was to find out if GM was legally obligated to reframe from altering retiree’s healthcare benefits unilaterally. Mr. Baumkel wrote “The record reflects that the only role of the Class Representatives and Class Counsel was an after the fact, rush review of documents.” Furthermore, the retirees were not offered the option of not participating in the lawsuit or negotiations.
Therefore, if you are a GM retiree and you fit in the picture drawn above then you need to file an Objection and join Mr. McKnight’s lawsuit by contacting his attorney!
III) Whipsawing and Dividing Members
Were the UAW/GM negotiations, discriminatory in nature? Did they represent the needs of all UAW members, current employees and retirees alike? NO! Since counsel for the retirees’ class participated after the Settlement Agreement was reached the proposed agreement favors present active employees who VOTED at the expense of the retirees, who did not get to VOTE! The UAW can only represent active employees who are the only members who can legally vote to ratify contracts. Therefore, the results of the Settlement Agreement only represents the fact that there was no undertaking of a meaningful adversarial fight to retain retirees rights to benefits! Unions can only represent the interest of current employees which is up held by the U. S. Supreme Court:
“Pensioners’ interests extend only to retirement benefits, to the exclusion of wage rates, hours, working conditions and all other forms of active employment. Incorporation of such a limited-purpose constituency in the bargaining unit would create the potential for severe internal conflicts that would impair the units ability to function and would disrupt the processes of collective bargaining. Moreover, the risk cannot be overlooked that union representatives might see fit to bargain for improved wages or other conditions favoring active employees at the expense of retirees’ benefits. (emphasis added).”
Again if you are a GM retiree and feel discriminated against by the methods used by the UAW and GM or because of the settlement agreement and/or because you did not get to vote on the MOU and you agree with the statements above then you should file a “Objection!” or join Mr. McKnight by contacting his attorney.
IV) GM’s Survival
According to assessment materials made available to the court there is no evidence that GM’s ability to survive is solely dependent upon reducing cost to retirees opposed to reducing cost to other operations and or departments of the corporation. The latter only proves that the need for cost savings from one source only mitigates the needs for savings from other sources as well. If the Champions (counsels) of the retirees’ class participated during negotiations then they probably would have negotiated a settlement that would allow GM to provide the minimum to prevent GM from going into solvency as well as reduce the cutbacks on retirees’ benefits keeping them to a minimum. They could have negotiated cutbacks relative to the retirees’ contributions, such as contributions made from GM management, Stockholders, and GM creditors all of who have a stake in keeping GM solvent just as much as the retirees do. Therefore, GM and UAW counsel never did present evidence in court that the court could use to determine whether GM has the ability to pay retirees’ health benefits or supplement them from contributions from other sources such as Stockholders or current employees, so GM could keep the contribution from the retirees to a minimum. Furthermore, no evidence has been put before the court that proves GM would have to go bankrupt in the near future.
If you are, a GM retiree and you agree with the statements above you need to file and “Objection” and join Mr. McKnight by contacting his attorney
V) Hand Picked
The UAW International Union handpicked all the representatives from Local Union retired workers councils. If you feel those retirees represent you, do nothing. However, if you believe those retirees do not represent your interest then you should file and “Objection!” and join Mr. McKnight by contacting his attorney.
VI) Viability of the DC-VEBA
“Under the new Modified Plan retirees’ premiums are going from ZERO to $50 dollar/ $105 per month for individual family coverage.” According to the Settlement Agreement these premiums will be reduced to $10/$21 per month with money from the VEBA. Mr. Baumkel said “However, the settlement agreement provides that there is no assurance that the VEBA’s assets will be sufficient to maintain the premiums at the $10/$21 level,” He said, “that there is no assurance that the $10/$21 premium would not increase because of insufficient funds in the VEBA.” The VEBA appears designed to go broke in five to six years. Even if it does go broke by 2007 contract negotiations active employees will be able to negotiate a new package and restore their retirement packages.
In addition, the UAW and GM both can walk away from the VEBA but the retirees are stuck with it whether the VEBA produces enough income to secure their healthcare or not! In fact Mr. Payne, counsel for the UAW and GM conceded during the hearing that “the funding of the VEBA is vulnerable, “insofar” as it is linked to the financial health of GM.” If GM winds up near solvency then the VEBA could go broke. However, if GM has several good profitable years, GM does not have to restore even one penny into the VEBA to help reduce the co-payments for retirees.
Stock appreciation funding of the VEBA is a shell game also. Since GM and the UAW negotiated the VEBA back in the summer of 2005, GM stock prices have dropped from 30 dollars to around 19 dollars a share. There is no guarantee in the Settlement Agreement that GM’s contribution of 8 million shares of stock can continue to support the retirees’ benefits at the 26 dollars a share level set in the Settlement Agreement. Furthermore, some of the funding for the VEBA will come from excess earnings from the GM pension plan (TRUST), which means GM may pay very little, if none, to the future contracts. The counsel or Champions for UAW/GM class, failed to get assurances in the Settlement Agreement that would make provisions by which improved financial conditions at GM would automatically restore the forfeited retirement benefits.
Last, but certainly not least, in present healthcare benefits provided to retirees there is a clause incorporated known as “Hold Harmless.” This protects claimants from being over charged by the providers, e.g. a retiree has a heart attack and he/she goes to the hospital afterward the hospital charges fifty thousand dollars but their healthcare only covers 30 thousand, under “Hold Harmless” the claimant would not have to pay a cent over thirty thousand dollars. The Hold Harmless clause was not written in the new VEBA or Settlement Agreement; therefore, a retiree under the new VEBA experiencing similar circumstances as in the previous example would be held responsible to pay the 20 thousand dollar difference. Would YOU want this to happen to you?
If you are a GM retiree and do not like what you read above, you need to file a “Protest” and join Mr. McKnight’s by contacting his attorney.
According to the December 22, 2005 docket, GM and the UAW are required notify every retiree who fits in the class. A copies of the VEBA, Settlement Agreement, letter from the UAW and a notice from the court instructing retirees of their right to object was ordered by the judge to be mailed to ever retiree. Some of the retirees have received these notices but many have not as of January 8, 2006. If you believe, you are a member of the class contact the GM department of the UAW (313) 926-5311, or call the Garden City Group (or class counsel) at 1(800)-295-4916 you only have until February 13, 2005 to get you objections filed!
The UAW Cooperation Partners have colluded with GM to steel pension benefits from every retired GM/UAW worker and their families. It is up to YOU and surviving spouses of retirees to stand up and fight the spoliation of your benefits. Mr. McKnight’s attorney by law cannot solicit your support for their case, which is also your case. However, others members like you and myself can do it for them.
The cooperation Partners may not want to live up to the preamble of the UAW Constitution but we, all of us active and retired members together can force them too.
Have questions? Please call or E-mail me at (256) 350-7181 or or contact Mr. McKnight’s attorney Mr. Mark S. Baumkel at: (248) 642-0444 or E-mail him at To get up dated Declaration forms to join Mr. McKnight in his lawsuit and/or Objection forms contact Mr. Baumkel or me.
Do not forget, February 13, 2006 is the dead line for Objections to be filed with the court!
Information came from the United States District Court Eastern District of Michigan, Southern Division, Case Number 2:05-cv-73991-RHC-VMM Document 41-1 Filed 12/27/2005