Judge gives preliminary OK to Chrysler-UAW health care deal

A federal judge gave preliminary approval Wednesday to a deal that would require Chrysler LLC's hourly retirees to pay more for health care and would shift the automaker's retiree health care obligations to a union-administered trust.

U.S. District Court Judge Robert Cleland tentatively approved the agreement Wednesday, saying he found it fair and reasonable. Cleland set a June 30 public hearing on the agreement.

Chrysler and the UAW agreed to the trust as part of contract negotiations last October. But they need court approval for it to take effect. The UAW and attorneys representing several retirees sued Chrysler in an effort to get court approval for the change.

Chrysler has 125,000 retirees, spouses and dependents covered by the agreement and 45,000 active U.S. hourly workers. If the court agrees to the change, Chrysler would contribute $10.3 billion to the trust, which would be responsible for covering the automaker's estimated $18 billion in retiree health care obligations. The trust would be run by an 11-member committee, with six members picked by the court and five chosen by the UAW.

UAW attorney Julia Penny Clark said the agreement protects retirees' benefits.

"This is the best way to assure that the benefits are taken care of and the auto companies can continue to stay in business," she said.

Chrysler attorney Nancy Ross said the agreement eliminates risk by separating retiree benefits from Chrysler's financial situation.

"We do believe in the light of the uncertain environment that Chrysler is operating that this settlement is the best for all parties," Ross said.

General Motors Corp. and Ford Motor Co. agreed to similar trusts with the UAW last fall. Cleland granted preliminary approval to GM's trust last month, and U.S. District Judge Paul Borman was scheduled to consider Ford's trust Thursday. The three automakers have a combined $86 billion in retiree health care liabilities on their books that would be taken over by their trusts as of 2010.

Under the new agreement, Chrysler's retired hourly workers will also face new co-payments and deductibles. Single Chrysler retirees will pay an $11 monthly premium and a $159 annual deductible, according to William Payne, who represents retirees in the lawsuit. That change will remain in effect at least until 2012, when the independent board administering the trust will be allowed to make further changes to retiree benefits.

The UAW reached agreements with GM and Ford in 2005 to make U.S. hourly retirees pay more for their health care, but the UAW didn't agree to make the same changes at Chrysler until it reached the new contract last fall.