With health deal, UAW's clout, influence grow

Union would be among largest private insurers

Bryce G. Hoffman and David Shepardson / The Detroit News

The unprecedented health care deal the United Auto Workers negotiated with General Motors Corp. may do more than insure retiree health care benefits against bankruptcy. It could give the union something it has lacked for a long time -- a voice.

As Detroit's automotive industry declined, so did the UAW's clout. Membership losses driven by job cuts diminished the influence of a union once courted by politicians and called upon to weigh in on matters of national importance.

Wednesday's tentative labor agreement will not bring back those jobs. But the UAW will become one of the largest private insurers in the United States once GM puts billions into a retiree health care trust fund, known as a voluntary employees' beneficiary association, or VEBA, that will be controlled by the union.

Wall Street firms already are lining up to manage that money, and experts say the UAW would be guaranteed a say in the national health care debate.

The union's pot could grow to more than $50 billion if UAW members ratify the agreement and similar deals with Ford Motor Co. and Chrysler LLC. The UAW will have delivered the "transformational" contract automakers say they need to survive and also transformed itself from an increasingly irrelevant anachronism into a powerful political force.

"The size and visibility of this trust fund puts the UAW at the epicenter of the health care debate," said Harley Shaiken, a labor expert at the University of California, Berkeley and a longtime adviser to the union. "It expands the UAW's visibility, influence and clout in a major way."

The UAW has long been an outspoken advocate for nationalized health care. Union leaders already are making it clear that they intend to use their new clout to push for a national solution to rising health care costs.

"(This) strengthens our commitment to national health care reform," said Alan Reuther, the UAW's chief lobbyist in Washington. "This is an issue that has to be addressed by Congress."

The timing could not be better.

"National health care could be on the agenda as early as 2009," said Mike Whitty, a labor expert at the University of Detroit-Mercy. "It will allow the union to take the lead in pushing for a single-payer national health policy."

Campaigners for health care reform already are welcoming the UAW's involvement.

"This does give the UAW a major voice in the national health care debate. We need that voice. We need a sense of urgency," said U.S. Sen. Debbie Stabenow, D-Lansing, who supports universal health care. She added that there is a role for the federal government to play in "supporting the VEBA."

Health care policy is not the only thing the union will be able to influence. As one of the largest private providers of health insurance, the UAW will also be able to influence health care networks and drug companies to provide more favorable terms and better benefits for its members.

The fact that the UAW may soon be responsible for some of the largest private investment funds in the country has not been lost on Wall Street. Many firms are already said to be preparing proposals for managing the union's money.

"People are going to compete for that," said BNP analyst Bradley Rubin, noting that management fees for funds this size would be enormous. "My sense is they won't give the full amount to one asset manager."

While big banks like JPMorgan and BNP Paribas are unlikely to enter the competition for the UAW's cash -- they would see it as reinvesting the money they have already lent to GM and the others -- Rubin said there will plenty of good firms lining up for the union's business.

Instead, the UAW will likely turn to firms specializing in investing retirement funds, such as Fidelity, PIMCO, Sun Life and AIG.

Rather than rail against the union for hamstringing the domestic automakers, major investment firms will do their best to win the union's business, Shaiken said.

"When the UAW talks, Wall Street will listen."

You can reach Bryce Hoffman at (313) 222-2443 or bhoffman@detnews.com.