GM, UAW to Focus on Health Care Costs

DETROIT – General Motors Corp. and the United Auto Workers are broaching a thorny issue for both sides at their annual meeting – skyrocketing health care costs and whether union workers should pay a larger share of them.

Several hundred GM and UAW officials were convening Thursday in the Detroit suburb of Dearborn, including UAW President Ron Gettelfinger and top GM executives.

The meeting comes at a difficult time for GM, which cited rising health care expenses when it slashed its 2005 earnings guidance by 80 percent last month. The world’s largest automaker spent $5.2 billion last year to cover 1.1 million salaried and hourly employees, retirees and family members. GM has said that could grow to $5.8 billion this year.

Two top GM executives – product development chief Bob Lutz and manufacturing chief Gary Cowger – have said recently the company should adopt a health care plan that provides the same benefits for salaried and hourly workers.

GM’s salaried workers pay 27 percent of their total health care costs, while the company’s UAW-covered hourly workers pay 7 percent, according to GM. The average U.S. corporate employee pays 32 percent of the cost of health care, GM said.

Merrill Lynch analyst John Casesa noted GM’s health care costs when he downgraded the company’s rating from neutral to sell last month. In a research note, Casesa said GM had $73 billion in retiree health care liability at the end of last year and a ratio of 2.4 retirees to every active employee.

“Its liabilities for pensions and retiree health care costs have become an immense burden,” Casesa said.

Gettelfinger has said the UAW recognizes that rising health care costs are a serious problem for automakers. But he also says the best solution is national health care reform, not further bargaining.

Detroit-based GM may ask the UAW to reopen its contract and negotiate new health care benefits. The contract was last negotiated in 2003 and expires in 2007.

The automaker also may try to negotiate a deal similar to one recently reached between the UAW and DaimlerChrysler AG’s Chrysler Group. Under that agreement, which went into effect April 1, roughly 35,000 Chrysler hourly workers and retirees now pay annual deductibles of between $100 and $1,000 for health care that previously was free.

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On the Net:

General Motors Corp.: http://www.gm.com

United Auto Workers: http://www.uaw.org