Settlement likely on trust fund for retirees at Dana Corp.

6/21/2007

Dana Corp. is close to a settlement that would eliminate its $1.5 billion obligation for retiree health care but would avert a catastrophic benefit cutoff for union retirees.

The bankrupt Toledo auto-parts producer and its two largest unions are near a settlement under which the company would commit to $700 million in total payments to a trust fund that would subsidize the cost of health coverage for current and future retirees, union representatives said.

It is unclear how extensively if at all the plan would curtail health benefits for the company s 16,400 current union retirees, many of whom are not old enough to be eligible for government coverage under the Medicare program.

But the fact that the company has tentatively agreed to commit that much will come as good news to the retirees, who were jolted last year when Dana officials announced they would use bankruptcy laws to try to shed retiree health-care obligations.

The company has up to 1,400 retirees from a Toledo plant shuttered 15 years ago, said Dick Rombkowski, a United Auto Worker activist from the plant.

They were devastated by the possible loss of benefits and are nervously awaiting the outcome of negotiations, he added.

Some early retirees are under 65 and not eligible for Medicare, Mr. Rombkowski said.

Retirees from a Dana plant in Lima, Ohio, also would be affected.

Chuck Hartlage, a Dana spokesman, said the company continues to work toward a settlement with the UAW and United Steelworkers unions, but he declined to comment on the details of negotiations.

But in material distributed to members this week, officials of Steelworkers Local 903 in Fort Wayne, Ind., said a settlement is close on the retiree benefits issue as well as a company proposal to cut wages and benefits for union workers.

Willie Campbell, a Steelworkers leader at a plant in Marion, Ind., confirmed that account.

Denny Leazier, Local 903 president, told The Blade yesterday that a settlement is not finalized and that any agreement must be approved by union members as well as a U.S. bankruptcy judge in New York.

The two sides advised the court last week that they were close to a settlement and would submit it by July 2.

A settlement would affect many more Dana plants than originally believed, including Lima, Fort Wayne and Marion, Ind.; Pottstown, Pa.; Auburn Hills, Mich.; Elizabethtown and Henderson, Ky., and Longview, Texas. The two unions represent 5,300 workers at Dana plants in the United States, company officials said.

The framework of the pending deal means Dana has apparently backed off a plan to chop pay by 25 percent and more at several higher-wage factories where workers make up to $20 an hour. It had asked the court to nullify its labor agreements, if necessary, to permit it to cut wages and benefits.

Instead, the two sides have settled on a two-tiered wage system under which new employees and possibly some very recent hires would receive $4 to $7 an hour less than veteran workers in some factories, the Local 903 summary states. Pay of current workers, union representatives said, would not be trimmed under the proposal.

Pension accrual would be frozen under the proposal, which would be part of new four-year labor agreements that would expire simultaneously at all union plants, Steelworkers members in Fort Wayne were advised.

All the terms, however, are subject to change.

Dana has said it needs the cuts to successfully emerge from Chapter 11 bankruptcy. It told the court it wants to cut wages and benefits by $180 million a year and, through other moves, cut costs by up to $540 million a year. The company said it pays about $130 million in cash each year in retiree health and welfare benefits.

Toledo s largest corporation, which filed for bankruptcy protection in March, 2006, has reached an agreement to curtail health benefits of retirees from nonunion plants and salaried retirees from union plants. It has also reached agreement with the Machinists Union on behalf of some union workers and retirees.

The company has agreed to pay $79 million $25 million now and $54 million upon emergence from bankruptcy into a trust fund for nonunion retirees similar to that being discussed for union retirees. The agreement covers 7,300 nonunion retirees from the company s Toledo headquarters and other U.S. operations, according to a Chicago attorney who negotiated for the retirees.

The money will be used to subsidize premiums for a group insurance plan open to all retirees, said lawyer Jon Cohen. The size of the subsidy is linked to length of service, and the plan would be established by a retirees group.

But there is no formula for setting up such trusts, and the union group could operate differently, he stressed.

Mr. Cohen declined to discuss average subsidies.

But Carl Ramich, president of a Dana retirees group from a long-shuttered plant in Reading, Pa., said some of his salaried members have sought Medicare-supplemental coverage on their own because of costs associated with the trust-fund plan.

Rodney Finch, a Dana retiree from the Fort Wayne plant, won t be eligible for Medicare for five years.

I can t not have health insurance, he said. He maintains that Dana made a commitment to provide health insurance for retirees, and he won t be happy with any settlement that doesn t continue full benefits.

Contact Gary Pakulski at: gpakulski@theblade.com or 419-724-6082.