Health Tab To Soar at GM

[guitarlix]

Health tab to soar at GM

Health care costs at General Motors Corp. and Ford Motor Co. will continue to rise at an alarming rate and are likely to spark a showdown with the United Auto Workers during upcoming contract talks, according to a new report released Monday by the respected credit-rating firm Fitch Inc.

Fitch looked at cash costs for health care at both GM and Ford and concluded that concessions made by the UAW in 2005 have not been enough to offset inflation-driven increases in health care spending, production cuts and the flow-back of workers from both automakers' former parts subsidiaries. Ford will see some modest gains as a result of its blue-collar buyout program, but both companies will continue to trend upward.

"The recent health care agreements with the UAW, changes to salaried health care programs and employee buyouts have pushed out the slope of the health care curve, but have done little to erase, or even narrow, the significant competitive disadvantage that these costs represent versus the transplant competition," Fitch stated in its report. "Health care will be the No. 1 issue in the upcoming labor talks, which are likely to be contentious."

Cash costs per vehicle grows

Assuming a modest health care inflation rate of 6.5 percent, Fitch found that health care cash costs for each vehicle built in the United States would climb to $1,064 at Ford and $1,783 at GM this year. Fitch believes Ford's per-vehicle health care costs will actually decline in 2008, dropping to $969 per vehicle, before heading back up in 2009 and beyond. But GM's costs in 2008 are expected to continue to soar to nearly double that figure -- more than $1,900 for each car and truck it builds in this country.

Fitch said GM is in a worse position than Ford because it has an older work force and its recent blue-collar buyout was more focused on convincing retirement-eligible workers to leave with their health care benefits than on persuading younger employees to sever their ties with the company. In contrast, Ford estimates that about half the workers who signed up for one of its hourly buyout packages opted for one that did not include lifetime health care benefits.

To make matters worse, GM will be assuming retiree obligations for thousands of former Delphi Corp. workers as part of a bailout deal with its one-time parts subsidiary. That will add more than $300 million in new health care costs to GM's ledger in 2007, according to the rating firm's analysis.

"Obviously, health care is something we have a definite interest in," said GM spokeswoman Michelle Bunker. "But we're not going to speculate on what we may be looking at in the future."

Fitch estimates that GM's cash spending on health care will increase by 9 percent from 2006 to 2008, while Ford's is expected to decline by about 13 percent during the same period.

"The decline in Ford's costs in 2008 are the result of the changes to health care programs and employment levels, and should not be viewed as a trend line," Fitch stated. "Health care inflation will result in this line resuming its upward climb in 2009."

Ford spokeswoman Marcey Evans said Ford's overall health care costs still topped $3 billion in the United States last year.

"Clearly, health care remains a challenge and a competitive disadvantage for all U.S.-based automakers," Evans said, "but we're not going to speculate or comment on specifics concerning 2007 contract negotiations."

The UAW declined to comment on the report.

No more concessions likely

Fitch said it is unlikely that the UAW will give either company enough relief to significantly reduce this competitive disadvantage during the upcoming national contract talks, slated to start later this year. After all, the modest concessions already given to the companies were ratified by workers by the slimmest of margins.

But Dennis Virag, president of the Automotive Consulting Group Inc. in Ann Arbor, said the issue will be hard to ignore.

"Health care and work rules: Those are the two major areas that I see being put on the table by GM, Ford and Chrysler," Virag said, adding that Fitch's conclusions are consistent with his own analysis. "Those are the issues that the UAW is going to have to deal with."

One way to deal with health care would be for the union to assume responsibility for retiree health benefits.

In recent months, a great deal of speculation has swirled around the possibility of a health care agreement similar to one recently negotiated between Goodyear Tire & Rubber Co. and its primary union, the United Steelworkers. Under the terms of that agreement, Goodyear agreed to fund the establishment of a union-run trust that will be responsible for providing health care benefits to retired hourly employees, effectively capping its health care liabilities.

Fitch said a similar deal is unlikely to be part of the next UAW contract because the Big 3 have much higher health care liabilities and greater capital restraints. "It certainly underlines the creative thinking that is occurring around this issue," the report stated.

http://www.detnews.com/apps/pbcs.dll...ww.google.com/

[sigma]

Something needs to be done about healthcare in this country. Last week on the news, they announced government projections that the cost of healthcare in this country will double to 1.6 trillion dollars, before 2015. Approximity 20% of every dollar spent in the US, will go to pay for healthcare.

Something needs to be done to get prices under control.

[mgescuro]

Originally Posted by sigma

Something needs to be done to get prices under control.

Sure. A National Healthcare program that provides the basic care. This of course would result in at least double the current taxes people pay now.

Then the question becomes... why should people who have decent healthcare pay for the people who don't bother to get it, don't want it, don't care for it, or just want to leech off the system.

So we'll see.
Basic healthcare is one thing. Frivolous healthcare -- paying to someone's Claritin because s/he sneezed kicking up dust, or paying for some 70 year old dude to get Viagra, or paying for some fat guy's medical bills -- is another.

GM and Ford need to quit paying for the frivolous crap and start putting in some preventive measures -- like a free gym membership or something.

[likearock00]

Ok, let me get this straight- GM keeps moving their factories outside the US to Mexico and Canada. You'd think with all those jobs shipped out that healthcare costs would decrease. Are they paying more to keep the old employees insured? This just doesn't make sense to me....

[windvale]

Originally Posted by likearock00

Ok, let me get this straight- GM keeps moving their factories outside the US to Mexico and Canada. You'd think with all those jobs shipped out that healthcare costs would decrease. Are they paying more to keep the old employees insured? This just doesn't make sense to me....

Don't quote me on this...but I think GM has > 2 retired employees for every 1 active employee - and they're paying the tab for their health care bill. This is one of the reasons that critics have called GM more of a Health Care compnay than an Auto company. Obviously this has to stop...

[gardnet1]

I would think that Ford's rate would increase faster considering the market share lost. I guess it goes back to early eighties downturn when GM kept employees and Ford and Chrysler shed them at a very high rate. because of a 7 year delay in GM getting rid of employees, they ended up with a huge increase in retirees/retiree costs compared to Ford/Chrysler.

[tgagneguam]

People, people, remember that healthcare costs continue to rise for very sane reasons. As one example, how on earth do people expect the former head of United Behavioral Health to live on a paltry retirement package? Hence, when all his retirement compensation is tallied, the cost comes in at nearly $1.8 billion (nope, that's not a typo). Of course, MBA-types defended this in a recent interview to say that CEO's work hard and that he deserves this largesse. 33 cents of every healthcare dollar is directed toward bureacracy-things like well-compensated careplanners to review the treatment policies of physicians and hospitals and to review mostly appropriate prescriptions. 4% of the revenue of healthcare companies is directed at paying the CEO of the company - that's a lot of money. And take a look at the salaries of your local heads of hospitals, and you'll find that the CEO's and CFO's there make considerable salaries, even at small, non-profit institutions. Of course, nearly 66% of these same institutions are hemorrhaging significant cash. So much for performance-based pay.

There's no doubt in my mind that if you can afford it, American healthcare is superlative. The problem remains financing it. Those who cannot afford it suffer, which largely explains why despite all the money we pay to healthcare (as a percentage of GDP, our nation ranks #1 in the world in healthcare expenditure), we have relatively appalling measures of health, from obesity to infant mortality rates.

I'm not so sure a viable solution is on the horizon, and it's probably going to take a lot of smaller ideas-some like personal responsibility for our individual health-to solve the problem.

[mike's 01ws6]

Originally Posted by likearock00

Ok, let me get this straight- GM keeps moving their factories outside the US to Mexico and Canada. You'd think with all those jobs shipped out that healthcare costs would decrease. Are they paying more to keep the old employees insured? This just doesn't make sense to me....

GM uses profits for their north american businesses to buy these other businesses that they should have been putting back into thier north american business, then they say that the north american business is unprofitable after milking it to death.

[mike's 01ws6]

Originally Posted by likearock00

Ok, let me get this straight- GM keeps moving their factories outside the US to Mexico and Canada. You'd think with all those jobs shipped out that healthcare costs would decrease. Are they paying more to keep the old employees insured? This just doesn't make sense to me....

They dont have as many US workers to put the cost of the retirees on the backs of so the number of course goes up. Then they take the payroll including the retirees and active workforce and divide it by the number of active employees and come up with these rediculous amounts that they claim people are being paid.

[VibenPontiac]

It seems I read this article last year when they were talking about costs escalating until after 2010 before they start slowly declining as some of the older retirees start to move to their eternal resting place!

Nothing new really.

[racy]

Originally Posted by tgagneguam

People, people, remember that healthcare costs continue to rise for very sane reasons. As one example, how on earth do people expect the former head of United Behavioral Health to live on a paltry retirement package? Hence, when all his retirement compensation is tallied, the cost comes in at nearly $1.8 billion (nope, that's not a typo). Of course, MBA-types defended this in a recent interview to say that CEO's work hard and that he deserves this largesse. 33 cents of every healthcare dollar is directed toward bureacracy-things like well-compensated careplanners to review the treatment policies of physicians and hospitals and to review mostly appropriate prescriptions. 4% of the revenue of healthcare companies is directed at paying the CEO of the company - that's a lot of money. And take a look at the salaries of your local heads of hospitals, and you'll find that the CEO's and CFO's there make considerable salaries, even at small, non-profit institutions. Of course, nearly 66% of these same institutions are hemorrhaging significant cash. So much for performance-based pay.

There's no doubt in my mind that if you can afford it, American healthcare is superlative. The problem remains financing it. Those who cannot afford it suffer, which largely explains why despite all the money we pay to healthcare (as a percentage of GDP, our nation ranks #1 in the world in healthcare expenditure), we have relatively appalling measures of health, from obesity to infant mortality rates.

I'm not so sure a viable solution is on the horizon, and it's probably going to take a lot of smaller ideas-some like personal responsibility for our individual health-to solve the problem.

Do you have any links?

[drew630]

Didn't UAW members agree to pay for a percentage of their healthcare?

[69Firebird400]

Originally Posted by racy

Do you have any links?

http://money.cnn.com/magazines/fortu...07/10/8380799/

What's different about the fire this time is that it is singeing respected CEOs like Nardelli, Raymond, and in the biggest brushfire yet, UnitedHealth (Charts) CEO William McGuire.

McGuire has long been hailed as proof that nothing is wrong with paying outlandish sums for outrageous overperformance - in his case a 40-fold increase in total return over fifteen years. ("I don't think we could have anticipated the shares [would reach] this level five years ago," McGuire has said in rejecting the "perceived problem" of his excessive comp.)

In March, the Wall Street Journal raised questions about possible options backdating at UnitedHealth (a practice that, while permissible under certain circumstances, can amount to outright theft of shareholder assets. No wrongdoing has so far been established, but the company, the SEC, and government prosecutors are all still investigating. Even so, the stock is down 22%, a drop that has lowered the value of McGuire's trove of in-the-money options from $1.6 billion in December to a still hefty $1 billion today.

And that's just talking about his stock options. You better believe he also received cash. He gets $5 million per year for life in severance pay.

http://www.startribune.com/535/story/751910.html

McGuire has more than $1 billion worth of unexercised options. His employment agreement also provides for a lump-sum payout of $6.4 million when he leaves the company and an annual pension of $5.09 million, according to the 2006 proxy statement.

[rueben44]

A National Health Care program would not double taxes! Hell we are spending billions in Iraq right now we could be paying for health care. Also all of these children being born that are not citizen’s fall back on insurance cost for the rest of us not to mention other health related tabs for the uninsured. Someone has to pay their tab when they walk out of the hospital paying nothing. I used to work in the healthcare field and have seen it first hand for over 6 years and it is not pretty.

I say we need a government program that subsidizes cost. Say you make 25K a year then you pay $50 if you have no insurance. If you do have insurance through your company you, your company, and the government pays a percentage of the premium. I don't want it all on the government just enough to help off set some of the cost.

[Laffer98]

The average GM worker is giving up between $2000 and $3000 annually to supplement GM's healthcare bill.

ALL LEGACY WORKER"S go on medicare at 62 and GM's healthcare cost decrease dramatically at that point. So worsecase scenario is GM weather's the burden for a few more years and then it all gets dumped on Joe taxpayer anyway.