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Lawsuit SUCCESUSW Forces Continental Tire to Provide RetireeContinental Tire North America (CTNA) has agreed tomake payments totaling $158 million to a retiree healthinsurance fund to settle a class-action lawsuit filed by theUnited Steelworkers and company retirees after benefits wereunilaterally reduced.The lawsuit alleged that CTNA violated federal law in April2007, when it imposed a $3,000 cap on its payments for retireehealth care coverage, forcing many retirees to pay $1,000 ormore monthly for coverage.“This was an unconscionable attempt by an employer to stripaway benefits from retirees who had already paid for them witha lifetime of work,’’ said International President Leo W. Gerard.“We couldn’t let that happen, especially given the current shamblesof our country’s health care system.”Settlement helps familiesThe settlement will provide health insurance benefits to anestimated 3,731 Continental retirees and spouses in 2,190 householdsas well as about 100 active employees who will be eligiblefor coverage when they retire.“It’s a victory our retirees deserve to win,” said Executive VicePresident Ron Hoover, who leads the USW’s Rubber/PlasticsIndustry Conference. “The company would not have coughed upone penny if not for the union’s persistence.”After stopping production at its unionized facilities in theUnited States, CTNA dramatically reduced payments for retireehealth care to $3,000 per year for coverage that can cost as muchas $15,000 a year.The change forced manyretirees to pay $1,000 ormore every month forcoverage, find other alternatives or go without. Since Continentalretiree pensions are among the lowest in the U.S. tire industry,many former workers were forced to choose between povertyand health care.“Some people just flat out don’t have insurance becausethey couldn’t afford what Continental was charging them,’’ saidMark Cieslikowski, president of Local 850 in Charlotte, N.C.,where the company quit producing tires in mid-2006. “It’s beena bad situation.”Federal law violatedThe USW and a group of retirees sued the tire maker after itmoved to cap health care payments to retirees. The lawsuitasserted that CTNA’s unilateral modification of retiree healthcare coverage violated federal law.Last July, federal Judge Jack Zouhary of the U.S. DistrictCourt for the Northern District of Ohio, Western Division,agreed with the union and ruled that the company had no rightto reduce or terminate benefits. He ordered Continental to fulfillits contract obligations to the retired workers and directed it tohold settlement talks with the union.The eventual settlement reached between the union and thecompany has been presented to Judge Zouhary for his approval.He has scheduled a hearing for August 26.“If final settlement is approved, everything can go forward,’’said Wayne Chambers, a pension and benefits officer with thelocal union at the now closed Mayfield, Ky., plant.Court approval crucialThe payments will start once court approval is granted. Thecompany agreed to immediately pay $40 million plus $3 million8 summer 2008 • USW@Work
SFULHealth Carecompensation to retirees for the 2007 period when CTNA’s $3,000cap was in effect.An additional $21 million will be paid in seven annual installments.Retiree Medical Benefit Liability payments with an approximatepresent value of $94 million will be paid over 20 years.CTNA’s corporate parent, Germany-based Continental A.G., isproviding a corporate guaranty for $65 million of the $94 million.VEBA trust committeeChambers is one of two USW-appointed members of theVEBA trust committee, which will have the power to establishbenefit levels. CTNA will have no representatives on the fivepersoncommittee. Three members are independent.“Once approval is final, the committee can go forward withtheir work looking at coverage levels and premium levels,’’Chambers said. “Their ability to do these important things islimited until the plan is final.”If the settlement is approved by the court and becomes effectivethis year, retiree health benefits will be provided through a newretiree health care plan that will be funded by the VEBA beginningon Jan. 1, 2009. If the settlement instead becomes effective in2009, the new plan will begin to provide benefits on Jan. 1, 2010.CTNA is providing interim benefits for most affected householdsuntil the settlement is approved by the court.This year, Continental’s contributions toward retiree health carewill be capped at $18,000 for retirees who are not yet eligible forMedicare and $4,200 for Medicare-eligible retirees.“The suffering is not over, but there is relief coming,’’ saidTerry Beane, retired president of Local 665 in Mayfield. “It’s beentough. It’s good to know justice is prevailing.”Q and A on theContinental SettlementWho is part of the settlement?All current retirees, their spouses and dependents, andsurviving spouses who were eligible to receive benefits underContinental Tire North America’s original plan on or beforeApril 11, 2008.What does the settlement provide?The settlement provides for the establishment and fundingof a dedicated trust fund— known as a VEBA— to provideretiree health benefits for class members and a group of about100 active employees who are eligible for coverage upontheir retirement.When does new coverage start?If the settlement is approved by the court and becomeseffective in 2008, then beginning on Jan. 1, 2009, retireehealth benefits will be provided through a new health careplan to be funded by the VEBA. If the settlement becomeseffective in 2009, the new plan would begin providingbenefits on Jan. 1, 2010.Are there interim benefits?Until the new plan takes over, Continental Tire isproviding most of those covered by the lawsuit with retireehealth insurance. For 2008, Continental’s contributions willbe capped at $18,000 for those not eligible for Medicare and$4,200 for Medicare-eligible retirees — the dollar amountsthat had been in the company’s labor agreements with theUSW before the dispute began.How is the VEBA funded?Once the settlement becomes effective and subject to certainoffsets for the cost of interim benefits, Continental willmake payments worth about $158 million in today’s dollars.Who will set the benefits?The new health care plan and the VEBA will beadministered by a five member committee, two of whomwere appointed by the USW. All five have experience inbenefits administration.Will there be reimbursement?The settlement includes a $3 million payment intendedto compensate retirees for the 2007 periodwhen Continental’s $3,000 cap oncontributions was in effect. Thecommittee will distribute themoney through a one-timereimbursement payment.Individual payments willdepend on premiums paid forMedicare Part B and MedicarePart D or to Continental Tireduring this period.ExecutiveVice PresidentRon HooverUSW@Work • summer 2008 9
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