by Bryan O'Keefe

There has been much written in the news lately about the ongoing contract negotiations between GM and the UAW. The latest rounds are critical for the auto manufacturers as they continue to suffer enormous financial losses under the weight of health care and pension obligations.

One creative way to alleviate some of those pressures in the health care arena could come in the form of a VEBA or Voluntary Employee Benefit Association. Basically, the company would make a one-time donation to the fund and then the union would be responsible for managing its investments and paying out the benefit. The VEBA would help the company because it could remove the health care costs from its balance sheet. It would put more power into the union’s hands, but also give them the additional obligation of investing the money wisely.

So far, it seems that agreeing on the details for a VEBA in the domestic auto industry has hit some significant snags. The Wall Street Journal reports today that the two sides are bogged down in talks over specific computer models that are trying to predict how much money will be needed and other complex details.

The Journal correctly notes that these types of stumbling blocks are much different from the old days of contract negotiations in smoke-filled rooms. In many respects, haggling over actuary computer models shows just how much labor negotiations and health care benefits have changed the workforce landscape in the last twenty years. The UAW and GM are also at a disadvantage because few companies and unions have worked together on such a large-scale VEBA like this before – they are truly entering unchartered territory.

But if the two sides are able to reach an agreement, there is a distinct possibility that it could be emulated in other union heavy industries that are experiencing financial problems (steel, airlines, etc.) This VEBA will serve as a model and that’s why it’s important to observe how its structured (if, in fact, they do work out the details and agree to it).

The VEBA also would mean a more meaningful role for labor unions, going from just negotiating contracts to actively managing important aspects of the contract traditionally left to employers. It could be a tremendous opportunity for a union to demonstrate their competence, worth, and relevance amidst declining membership numbers. But, if the union mismanages the VEBA, it might lead to even greater dissatisfaction and distrust of organized labor.

That’s why what is happening in these contract negotiations today could figure heavily into labor’s long-term success or failure.

Bryan O'Keefe is a labor policy analyst in Washington, D.C. He is a frequent contributor to EFCA Updates and WorkplaceHorizons.com.