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Key Battle Looms Over Retiree Benefits : Health care: Truck maker Navistar wants to be let out of medical obligations it negotiated with its unions. It says its survival is at stake.

August 17, 1992|From Associated Press

INDIANAPOLIS — Lisa Rink recently forfeited a day's pay at Delco Electronics in Kokomo, about 50 miles from here, so she could march for Navistar International Corp. retirees who face cuts in their health benefits.

In Rink's mind, if Navistar succeeds, other U.S. corporations might follow suit.

"A day's pay doesn't mean nothing compared to what we would lose in insurance," Rink said.

About 75 Indiana union members demonstrated in Indianapolis last week outside a hotel where Navistar was explaining the cuts to its retirees. The union presence demonstrated a growing fear that retirement benefits are becoming fair game to corporations in financial difficulty.

"A lot of people don't think it happens until it's taken out of their own pockets. It's something that can happen to us," said Lisa Pizzuto, Rink's sister and an employee at Delco, a General Motors Corp. subsidiary.

Navistar, a troubled Chicago-based truck maker, says it needs the cuts to survive. Experts say the Navistar case could test some complex labor law issues, possibly setting a precedent that confirms the fears of union members.

Navistar has filed a petition in U.S. District Court in Chicago seeking confirmation of its right to cut retiree health benefits without consulting the company's unions. The United Auto Workers union has said that it will oppose Navistar.

Navistar's 40,000 retirees and their dependents now receive virtually free health, dental and vision coverage. With only 13,000 active employees, the firm says it must cut its growing health costs to avoid insolvency.

"We looked at every other way to cut costs that we could think of," said Navistar spokeswoman Mary Moster. "The burden is just too big, so we have to take this step now."

Union leaders and labor experts say pensioners are an easy target. Unions cannot legally strike to protect retirees, who technically are no longer represented by a union.

"It's a signal for folks in Indiana that corporate America is prepared to disavow its promise to its former employees, and profits being almighty, it'll signal other corporations to do the same thing," said Charles Deppert, president of the Indiana AFL-CIO.

But Moster said Navistar had no choice but to seek the cuts. With three retirees for every active employee, the company has disproportionately high health care costs, she said.

"These costs are so high that literally the survival of the company is at risk," she said.

Mark Crouch, an associate professor of labor studies at Indiana University's Fort Wayne campus, said an anti-union precedent could be set. "There's no promise that's made by any corporation that won't be broken if it's in the company's best interest. It doesn't matter what the company is," he said.

Moster disagreed.

"The Navistar situation is . . . not analogous to other companies. Although other companies may be trying to make changes in their health care benefits, other companies are not coming forward to say the survival of the company is at risk," she said.

Navistar retirees said last week that they can't afford to pick up the new insurance premiums, deductibles and co-payments.

Retirees under age 65 would pay an estimated $1,400 in annual premiums and face deductibles and co-payments up to $2,000 for an individual. Retirees 65 and older would pay about $330 in premiums, plus up to $2,000 in deductibles and co-payments.

"The majority of our retirees believed these were lifetime benefits," said Jerry Ruble, president of United Auto Workers Local 98, which represents workers at Navistar's Indianapolis foundry.

The Navistar case also demonstrates that health care has become one of the most important bargaining issues for management and labor alike, observers said.

Deppert estimated that 70% of labor disputes today revolve around health care benefits.

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