Members of the United Auto Workers (UAW) union ratified a new 40-month labor agreement covering 1,700 workers at seven Mack Truck facilities in three states, giving the truck OEM some much needed costs savings as it continues to grapple with the economic downturn.
"In addition to helping us address the current challenges facing our economy and our industry, the agreement will improve our competitiveness, and help position us for growth," said Dennis Slagle, Mack's president and CEO.
"This successfully ends a process that began some time ago," John Mies, Mack's vp-communications, told FleetOwner. "We've been at this for some time since the previous contract expired in October 2007. It's good to have it done."
While Mies would not divulge the contract's specifics for "competitive reasons," he did say the new labor contract gives Mack the flexibility it sought so the OEM can react more effectively to market changes. "Dealing with the cyclicality of the truck market -- especially due to the emission rules -- has been one of our biggest challenges," he said.
The new labor deal – in effect from June 1 this year through October 1, 2012 – transfers the responsibility for providing worker retiree health benefits from the OEM to the union, creating a UAW-managed independent trust known as a Voluntary Employee Beneficiary Association (VEBA).
The VEBA would permanently assume the sole obligation of providing retiree health benefits to roughly 9,000 current Mack-UAW retirees, surviving spouses and dependents, as well as for future UAW retirees, while eliminating Mack's health care liabilities for this group, the company said in a previous statement.
The VEBA is still subject to an approval order from the U.S. District Court for the Eastern District of Pennsylvania, a process that could take up to a year, Mack noted.
Mack's parent company, Sweden-based AB Volvo, has agreed to fund the VEBA with $525 million in cash, which would be paid in equal installments over a five-year period, with the first payment made no earlier than July 1, 2010.