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Company will put up $1 billion to start independent medical plan
Published on Saturday, Aug 23, 2008
From staff and wire reports
Goodyear Tire & Rubber Co. won federal court approval in Akron Friday for a plan to create a health-care trust for union retirees.
The independent health-care trust was the key issue in contract talks that led to an 85-day labor strike in 2006.
The plan is designed to provide health benefits to about 30,000 retired Steelworkers, including thousands of retirees and their spouses in the Greater Akron area.
Goodyear agreed to make a one-time payment of $1 billion into the plan, after which it would not be responsible for providing health benefits to union retirees.
Steelworkers still employed at Goodyear will be required to pay a portion of cost-of-living increases and profit-sharing into the plan.
The $1 billion payment will be made initially from existing cash reserves and available credit lines, Goodyear said.
Creation of the Voluntary Employees' Beneficiary Association, or VEBA, will result in annu
al savings of about $100 million and boost annual cash flow by about $130 million compared with 2007, Goodyear said.
''Gaining court approval for the VEBA is a win-win for Goodyear and for our current and future USW retirees,'' Chief Executive Robert J. Keegan said. ''This agreement both protects retiree benefits for years to come and removes a significant legacy obligation from our North American business.''
''Legacy obligation'' refers to companies' financial responsibility for employee benefits in the future, when many workers have left their jobs.
The United Steelworkers union applauded the judgment by U.S. District Judge John R. Adams.
''This decision confirms the victory we achieved as a result of the work stoppage,'' USW International President Leo Gerard said. ''Retirees who spent their working lives employed at Goodyear can now be assured that funding for health insurance and prescription drug coverage is protected and cannot be taken away from them.''
The class-action lawsuit was brought by the USW and two Goodyear retirees, Gerald Redington, of Lena, Ill., and Bennett Toller, of Danville, Va. It challenged the company's right to reduce or terminate health benefits for retirees.
Nine trustees will oversee the fund. Three will be appointed by the union; four are public members, drawn from experts in the health field; and two trustees will be appointed by Redington and Toller.
''The union will not operate the fund but our members will contribute to it in the future,'' said Ron Hoover, USW Executive Vice President of the Rubber and Plastic Industry Conference. ''Trustees of the fund and the fund's management will be working strictly on behalf of Goodyear's retirees.''
Goodyear said it expects to complete the legal process by the end of the third quarter if no appeals are filed.
The fund was used as a model for U.S.-based automakers during labor negotiations last year. General Motors Corp., Ford Motor Co. and Chrysler LLC agreed to set up VEBAs during contract talks.
Get the full article here.
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