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GM reinstates health insurance for striking UAW members

Key Points
  • GM has reinstated health-care benefits for its 48,000 United Auto workers members who are on strike.
  • The company cut health-care coverage for union members and moved them to more expensive, temporary COBRA plans on Sept. 16, the first day of the strike.
  • GM said it was reinstating the coverage after realizing its change caused "significant confusion" among employees.
  • A union leader called GM's actions regarding health-care coverage "irresponsible."
United Auto Workers members on strike picket outside General Motors' Detroit-Hamtramck Assembly plant on Sept. 25, 2019 in Detroit.
Michael Wayland / CNBC

DETROIT – General Motors has reinstated health-care benefits for its 48,000 workers who are on strike as contract talks with the United Auto Workers come closer to a tentative deal that would end the work stoppage, which is now in its 11th day.

The automaker cut health-care coverage for union members last week, moving them to more expensive, temporary COBRA plans on Sept. 16, the first day of the strike.

GM said it was reinstating the coverage after realizing its change caused "significant confusion" among employees, according to a letter received by the UAW on Thursday. Some employees were unsure whether they had health benefits at all, according to interviews with workers and other media reports.

"GM is very concerned about the significant confusion caused around our employee's health care coverage," Scott Sandefur, GM – North America vice president of labor relations, wrote in the letter to UAW Vice President Terry Dittes. "Throughout this negotiation GM has said that our number one focus was on the well-being of our employees. That remains the case today."

Dittes, in response, called GM's actions regarding this "very important" matter "irresponsible," saying the automaker is "toying with the lives of hundreds of thousands of our UAW families."

"There is no doubt that public sentiment see these actions of GM as a shameful act!" Dittes wrote in an emailed letter.

How fast the benefits resume for the workers will likely depend on the provider.

It's unclear how much, if any, the reinstatement of the health-care benefits will impact negotiations, which Wednesday progressed to the "Main Table" of top-level negotiators. Having all of the issues at the "Main Table" and not in subcommittees is typically a sign that a deal is closer, if not imminent, as long as the talks don't breakdown.

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UAW, GM close to a deal

Art Wheaton, a labor professor at the Worker Institute at Cornell University, believes the reinstatement of the health-care benefits should help ease tensions at the bargaining table and picket lines. It also should assist GM with public sentiment, he said.

"It sounds like they were trying to eliminate one of the negatives against them and help with public support," Wheaton told CNBC. "They can try to win back more of the membership."

GM's decision to cut the benefits without warning in the middle of the month was a "pretty tough" negotiating tactic and not necessarily "a good thing" for the company, he said. Instead, GM could have simply continued the coverage or alerted the union that benefits would be cut at the end of the month, allowing members to plan ahead.

Health care has been among the major issues in the negotiations, however, GM said after the strike was called on Sept. 15 that a proposed deal to the union would have allowed members to "retain nationally-leading health care benefits." It's unclear if that remains part of the new deal that's currently being negotiated.

UAW members with the Big Three Detroit automakers currently only pay roughly 3% of their health-care costs. That compares with the automakers' salaried workers, who pay roughly 20% to 30%, and the average U.S. worker at 28%, according to the Henry J. Kaiser Family Foundation.

GM's use of temporary workers, pay for union members and keeping plants open that have been slated for closure also have been among the major sticking points in the negotiations, according to people familiar with the talks.