Among a list of demands that even United Auto Workers President Shawn Fain admits is “audacious” in its contract dispute with automakers General Motors, Stellantis and Ford is the restoration of a traditional defined benefit pension plan for its union members.
Currently, UAW workers who were hired after 2007 don’t receive pensions, but instead access to 401(k) plans. The union wants its pensions back, while the automakers oppose the idea and are likely countering with promises of increased company contributions to 401(k) accounts for workers hired since 2007.
Given the nature of collective bargaining, it is highly unlikely that the UAW will achieve many of its contract demands as negotiations heat up with a fast-approaching deadline—and the pension demand seems unlikely to most observers to stick.
The prospect of a strike against one or all three of the automakers by 146,000 UAW members has the nation uneasy with a looming deadline to reach an agreement of 11:59 p.m. on Sept. 14. Fain said this week that the union plans to go on strike against any Detroit automaker that hasn’t reached a new agreement by the time contracts expire next week.
Just a 10-day UAW strike that shuts the “Big 3” Detroit automakers could cost carmakers, suppliers and workers over $5 billion, Michigan-based Anderson Economic Group estimated recently.
As of Friday afternoon, no agreements have been reached with any of the three automakers despite ongoing negotiations.
Along with other concessions during the Great Recession, UWA gave up pensions for new workers in exchange for 401(k) contributions following GM’s 2009 bankruptcy.
While getting pensions back was a top priority for the union’s self-described rank-and-file movement, “Unite All Workers for Democracy,” during negotiations in 2019, it didn’t happen as a result of a deal that ended a 40-day strike.
Current negotiations are based on a long list of UAW contract demands, including the 46% pay raise over 4 years, a 32-hour workweek for 40 hours of pay, the aforementioned return to traditional pensions, and significant increase to current retiree pensions.
UAW has acknowledged the automakers will not agree to all of the conditions, but it remains to be seen which demands might be included in a new deal.
The return to traditional pensions, however, has received plenty of attention as talks and efforts to avert a strike heat up.
An opinion piece published on Bloomberg Sept. 6 by columnist Allison Schrager, a senior fellow at the Manhattan Institute, argues the UAW is wrong in seeking a return to pensions, as the “old-fashioned defined-benefit plan is not the best fit for the modern economy.
Schrager writes that it’s a commonly held view that defined-benefit plans contributed to the decline of U.S. automakers, and that freezing the pensions for new hires in the 2000s was a big part of the reform that enabled them to stay competitive with foreign automakers.
She argues that DB plans were never that great for workers as there were incentives to underfund them, leading retirees to not get the payments they were promised.
“Once federal laws forced plan providers to both properly fund defined-benefit pensions and use good accounting standards to measure their liabilities, it became clear how much pensions cost—and employers dropped them,” Schrager said.
She adds that pensions should be even less appealing to younger autoworkers who would supposedly benefit from having them restored.
“They are also the ones who are more likely to change jobs, and so would be better off with higher pay and a more portable plan, such as a 401(k),” she writes.
CNBC reported Friday in an article about Stellantis’ counter-offer to UAW that only about 30% of Stellantis’s UAW-represented workers—those hired before October 2007—currently have pension plans. While making no mention of restoring pensions, Stellantis offered a 14.5% pay increase and a $6,000 one-time “inflation protection payment” in the first year of the deal, and a total of $4,500 in additional payments over the following three years.
The proposed 14.5% wage increase is larger than those offered to the union by General Motors and Ford, which offered raises of 10% and 9%, respectively, along with additional ratification bonuses that Stellantis didn’t offer.
Back in 2007, GM froze the accrued pension benefits for about 42,000 U.S. salaried employees and put them in new plans, including 401(k)s, in a move to cut soaring pension liabilities. In 2012, Ford offered a voluntary lump-sum buyout of defined benefit pensions to salaried retirees and former employees in an effort to reduce its pension liabilities.
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