Healthcare Benefit Recommendations for Navistar HRM Report Analysis

This report analyzes the human resource management (HRM) challenges faced by Navistar International regarding its retiree healthcare benefits. The company, grappling with a financial crisis, had promised extensive healthcare coverage to retirees and active employees. However, escalating healthcare costs led Navistar to consider reducing its liabilities, prompting legal battles with the United Auto Workers (UAW) and retirees. The report recommends Navistar avoid filing for Chapter 11 bankruptcy and refrain from seeking a declaratory judgment in court, emphasizing the importance of protecting retiree benefits. It suggests revising healthcare benefit policies through negotiations with the UAW and retirees, potentially redesigning plans or providing refunds. Furthermore, the report stresses the need for the company to furnish supplemental financial information to convince stakeholders of the proposed changes. The rationale behind these recommendations centers on preserving the company's financial standing, adhering to legal protections for retiree benefits, and ensuring transparency in financial disclosures.

HUMAN RESOURCE MANAGEMENT
Compensation and Benefit

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Table of Contents
Issue............................................................................................................................................................2
Recommendation.........................................................................................................................................3
Rationale.....................................................................................................................................................3
References...................................................................................................................................................5

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Issue
Navistar international had been giving health care benefits to its retired employees for years. The
company had also announced that all of its active employees would become eligible for health
care benefits and insurance benefits soon when they retire. The company had been providing free
health care to all its retired employees without any deductibles, hospital co-payments or required
contributions to the amount of insurance premiums.
But later in 1980's, it started facing a serious financial crisis due to which it was facing problems
of escalating health care costs. Due to the current financial crisis, it decided upon reducing its
health care liabilities. Due to the bankruptcy problems face by the company, even the other older
companies in the industry were getting affected as they were also having a large number of
retirees and they had also made promises to them for post-retirement health care coverage in the
union contract. Due to such problems, the Navistar in the year 1992, had approached the Union
Auto Workers which was the principal union and told that it was facing issues with regards to the
cost of health care of retired employees and there was a threat of company's insolvency. But the
problem got even worse when the Navistar finally filed a suit in Federal District court in order to
seek a declaratory judgment as to the fact that it was entitled to modify or terminate its
retirement health care benefits unilaterally. The company explained in the court that its reason
for seeking such a declaration was mainly related to the efficiency and while seeking the
judgment the company had classified the retirees as an entire class to whom the judgment shall
apply. UAW got angry with such a step of the company and had filed a countersuit against the
company claiming that Navistar had no legal right to unilaterally modify the terms of the
retirement benefits as UAW was the principal union. In addition to this, there were various

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lawsuits filed against the company by the retirees. Although the UAW had agreed to sit and
decide upon the matter mutually outside the court.
Recommendation
It has been recommended by the company that the company should provide for the health care
benefits to its retirees and should not file for chapter 11. Also, the company should not file any
suit for declaration of judgment against the retirees. It has also been recommended to the
company that providing the health care benefits does not mean that they have to provide it
unchanged. Rather they should try to convince the retirees and the active employees that the
financial position of the company cannot afford the cost of health care at the same level as it was
paying earlier. So there needs to be a revision of the heath care benefit policies of the company.
It is further recommended that the company can choose either of the two options of changing the
policies related to health care benefits o retirees (Allen, 2015). It can potentially reduce its
liabilities after taking consent of UAW along with the majority of retirees either by redesigning
its current health care plans or by refunding them. The company through this way can reduce its
health care liability, and at the same time, it would not attract any lawsuits against it from the
retirees for the breach of contract. And lastly, it has been recommended to the company to
furnish its supplemental information along with its asset position in order to convince the retirees
and active employees to agree to the proposed changes in the health care plans by the company.
Rationale
It has been recommended to the company not to file Chapter 11 because although by filing
Chapter 11, the company would be able to escape its health care liability but it will lose its debt
rating in the market as it has already been observed in this case that when the company decided

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upon cutting its health care benefits, the various debt rating agencies had rated the company on a
very low scale as compared to the rating given by them earlier to the company (Michaud, 2016).
It has also been recommended to the company to not to file any suit in the federal court for
seeking a declaration of judgment. This is because the courts generally follow the law of
Congress’ which has always been protecting the retiree benefits in situations where there had
been a valid contract between the company and the retiree. And lastly it was recommended to the
company to furnish its supplemental information along with its asset position to the retirees and
active employees because for the purposes of additional analysis, the basic financial statements
are not required but rather the supplemental information is required by the Department of
Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement
Income Security Act of 1974 (Longshore, 2014).

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References
Allen, H. (2015). Success overlooked—Navistar, 1999 to 2009: the huge impact an employer's
approach to wellness can have on health care costs and sustained value. Journal of occupational
and environmental medicine, 57(1), e3-e7.
Michaud, T. L., Nyman, J. A., Jutkowitz, E., Su, D., Dowd, B., & Abraham, J. M. (2016). Effect
of Workplace Weight Management on Health Care Expenditures and Quality of Life. Journal of
Occupational and Environmental Medicine, 58(11), 1073-1078.
Longshore, I., & Act, H. W. C. (2014). RECENT SIGNIFICANT DECISIONS--MONTHLY
DIGEST# 266.