Federal Court Upholds Ford, GM Retire Health Cost Settlement

By: Associated Press
By: Associated Press

Tuesday, a federal appeals court upheld two settlements that require union retirees of General Motors Corp. and Ford Motor Co. to pay more for their health care.

GM, Ford and the United Auto Workers Union reached the settlements in 2005, and U.S. District Court approved them the following year. The settlements cover 472,000 retirees and dependents at GM and 172,000 at Ford.

About 2,000 retirees objected to the settlements and appealed to the 6th U.S. Circuit Court of Appeals. Among other issues, the objectors said the settlements violate the automakers' promises that their health care benefits would continue after retirement. They claimed the UAW had too much influence in selecting the attorney who represented the retirees and that retirees were given inadequate information on how to challenge the settlements.

In a unanimous decision, the Cincinnati-based federal appeals court agreed with the lower court that the settlements were "fair, reasonable and adequate" and that retirees were properly represented and given adequate information.

"If we decided for the sake of argument that the retirees were likely to win the debate, any such victory would run the risk of being a Pyrrhic one because the cost of insisting on irreversible health care benefits might well be, and indeed almost certainly would be, the continuing downward spiral of the companies' financial position," the appeals court said.

The appeals court said the UAW's influence was limited to referring some retirees to an experienced labor lawyer. The court said the union had to get involved because no individual retirees had filed suit to protect their benefits during the six months that the UAW, GM and Ford were negotiating the settlements, and the union and the automakers needed court approval to change their retirement benefits.

GM has said the agreement would save it $1 billion after taxes each year, while Ford said it would save it $200 million annually.

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