Pensions not yet for auto workers

Pensions not yet for auto workers

While United Auto Workers members who were hired prior to the 2008 financial crisis have pensions, those brought on since then have received 401 plans instead. The union wants the auto companies to provide pensions to new employees and those who currently lack them.

Ford Motors, General Motors Co. and Stellantis NV are determined to consign pensions to the past, even as striking UAW members are just as eager to revive them. The fight has resonance well beyond the auto industry. With inflation continuing as the U.S. enters another fraught presidential election cycle, the problem of the middle class - and the financial condition of millions of retirees - is front and center.

Labor experts don't see a return to a system of full-fledged pensions coming anytime soon, unless ever, because of the massive cost associated with them. Even so, demanding pensions is a smart strategy, many say, because it reminds both sides how far behind auto workers have fallen since their heyday.

As a bargaining chip, 401 funds may be redeemed by other sweeteners, such as more generous matching contributions to 401 funds. We're not giving up on these issues, we're going to push harder, said John Logan, chair of the Labor and Employment Studies department at San Francisco State University.

For the most common retirement plans, defined-benefit pensions were the most common, with employees typically receiving a guaranteed monthly income in retirement, and employers took on the cost and the risk. The U.S. has seen a decline in traditional pensions, with such pensions becoming highly rare outside of the public sector.

In the 1980s, a full-scale shift in almost every industry began, as companies undergoing a wave of restructuring moved from pensions to so-called 'defined contribution' plans, like 401s, where employees determine how much to contribute and companies often match funds up to a set amount. Under this model, the employee takes charge of most of the cost and takes all of the risk. There are no guarantees for an individual's monthly income in retirement, as it is determined by how much money they contribute and how their investments perform.

Now that the Detroit autos are raking in record profits and CEO pay is increasing, striking workers demand to get back the benefits they sacrificed to help the auto companies skirt financial collapse in the 2008 financial crisis.

This isn't the first time autoworkers have been trying to get back their pensions. A return to retirements was among the demands put forward in 2019, but the debate was sidelined and pensions were left out of a final deal following a 40-day strike by GM. Under current financial accounting regulations, the cost of providing a defined benefit plan is prohibitive.

A more than 40 percent wage hike in the UAW, cost-of-living increases, a four-day work week and a boost to retiree benefits would add more than $80 billion to each of the biggest U.S. carmakers' labor costs, according to people familiar with the companies' estimates.

But Logan said that UAW's pension demand, or some version of it, may spread to other unions, reigniting a conversation about a benefit that many thought was long gone. From United Parcel Service, Inc. to Hollywood, 'what you've seen in the last year or so, especially, is unions are definitely feeling emboldened in many industries right now.