Definitions of terms that may have significance in these negotiations

Healthcare Terms

Cost Sharing

The manner in which the Company and the employees split the overall cost of health care coverage (often expressed as a percentage). Employees can “share” costs in several different ways, including co-insurance, deductibles, co-pays and premium contributions (see separate definitions for each below).

Co-Insurance

The percentage of the cost of certain services that employees are responsible for paying after the deductible is met.

Co-Pay

A fixed dollar payment for certain services, for example, an office visit.

Deductible

The dollar amount employees must initially pay for certain eligible health expenses before co-insurance with the company is triggered. This is similar to the deductible one might have with a car insurance policy.

Premium

The fee that is required (typically on a monthly basis) to maintain health care coverage for that period. Where employees contribute to the premium, the employee contribution is typically deducted from an employee’s paycheck. Currently, UAW-represented employees do not pay any premiums directly, but a portion of the employee COLA allowance (see definition below) is diverted for this purpose.

Post-Retirement Health Care

Navistar currently provides and funds health care benefits for approximately 40,000 union and non-union retirees (the number includes their eligible spouses and dependants). Funding these benefits comes at a significant cost to the company. Eligibility varies depending on factors such as hire date and representation status. Under the current UAW multi-site contracts, employees hired since 10/1/02 are not eligible for post-retirement health care benefits.

 

Cost-Related Terms

Fixed Costs

Fixed costs are those that don’t vary with the ups and downs of sales volumes and production. It includes items such as interest expense on loans, retiree benefit costs, utilities, rent, sales, engineering and administration expense, etc. These are the bills that stay at about the same amount no matter how many trucks, buses or engines we’re producing.

Variable Costs

Variable costs are those that can go up and down based on sales or production levels. For example, we need to buy more materials as we build more trucks, buses and engines, and may need to pay employees overtime as they work longer hours to meet customer demand.

Inbound Freight Costs

The costs incurred by Navistar to have truck and engine parts shipped from suppliers to our facilities. Over the last several years there has been a shift in parts suppliers who have moved their operations from the Midwest to the southwest United States and Mexico. This has increased the total enterprise-wide cost of production for assembly facilities in the northern part of North America.

Outbound Freight Costs

This cost refers to the freight charges we incur to deliver a truck or an engine from our assembly plant to its next destination (which could be a dealer, body manufacturer or end customer). Delivery charges obviously cost more the farther that next destination is from the assembly plant.

Cost of Living Allowance (COLA)

A payment made by Navistar to employees covered by the current UAW MLCs over and above the employee’s base wage that is intended to account for changes in the cost of living over a period of time. COLA is periodically either increased or decreased based on the U.S. Bureau of Labor Statistics’ Consumer Price Index.

 

Operational and Union-Related Terms

Active Employees

Currently working employees. This term does not include those employees on layoff, disability or leave of absence, or company retirees. The UAW MLCs currently cover approximately 2,000 active employees, plus and additional 500 inactive employees who are currently on layoff or leave.

Bargaining Unit

The group of employees at a location who are represented by the union.

Job Classifications

The particular jobs that are included in the bargaining unit. Depending on the extent to which they are defined, job classifications can range from broad-based and flexible to narrow and restrictive.

Master Recall List

A provision included in the current UAW MLCs that allows certain long-service employees on layoff to transfer to another Navistar UAW plant location under certain circumstances. The contract outlines specific criteria for employee eligibility and when an employee will be added to or removed from the Master Recall list.

Skilled Trades

Jobs within the bargaining unit that require specialized training and skills. Traditional examples include electricians and mechanics. Navistar’s UAW-represented facilities have more skilled trades classifications than others in the industry, resulting in costly inefficiencies and idle time for employees.

Supplemental Unemployment Benefit Plan (SUB)

A contract provision under which employees receive compensation from Navistar while on layoff status during the term of the contracts. SUB is intended to supplement state unemployment benefits to bring an individual’s income closer to his or her normal after-tax wage.

Temporary Workforce

Common among highly flexible manufacturers/companies, temporary workers are typically utilized to cover temporary increases in production requirements or other temporary needs. By “flexing” temporary workers according to market demand, companies are able to control costs and maintain greater job stability/security for regular full-time employees.