The Titanic attempts to rescue the Andrea Doria.Â The wooly mammoth attempts to mate with the sabretooth tiger.
A mistake or brilliant?!
A little history…
New York Times
Health care costs soaring for GM
Projected expense for retirees is $63 billion
By DANNY HAKIM
Posted: Sept. 14, 2004
GM covers the health care costs of 1.1 million Americans, or close to half a percent of the total population, though fewer than 200,000 are active workers. Not only are such costs escalating rapidly, but GM’s rivals, based in Japan and Germany, have virtually no retirees from their newer operations in the United States and, at home, the expenses are largely assumed by taxpayers through nationalized health care systems.
Compared with GM, Toyota, the industry’s most profitable automaker, pays almost nothing for health care. It employs 31,000 Americans, whom it covers with a good health plan, but the company said in its latest annual report that its future financial obligations for its retirees’ health care were not large enough to affect its profits significantly.
The United Automobile Workers union negotiated generous pension and health benefits with the American automakers in a pre-globalized era in which the Big Three essentially made up the world’s auto industry. Today, with competition global and the U.S. health care system putting the burden largely on employers, retiree medical costs are one reason Toyota’s $10.2 billion profit in its most recent fiscal year was more than double the combined profit of the Big Three.
“We’re spending more on health care and less on the auto business, and frankly that does not work,” said John Devine, GM’s chief financial officer.
The biggest challenge for GM is not so much that people are living longer today, but that medical costs are going up so fast in an era of mega-marketed pharmaceuticals and big-ticket diagnostic tests. When Pusey retired, medical spending was about 5% of the nation’s Gross Domestic Product, compared with about 15% today. Average spending per person on hospital care alone is up from $318 in 1965, inflation adjusted, to about $1,600 today.
For GM, which earned $1.2 billion last year, annual health spending has risen to $4.8 billion from $3 billion just since 1996, even as deaths and job cuts have trimmed its worker and retiree ranks and it has taken numerous steps to trim costs. The company also contributed another $3.3 billion last year to a retiree health care trust fund. Out of the total 1.1 million people it covers, GM pays health care expenses for 450,000 retirees and their spouses.
Ford Retirees to Pay Some Health Care Costs
By Dee-Ann Durbin
December 15, 2005, Page D2
The UAW announced over the weekend that it had reached the deal with Ford, but details were withheld until after the UAW presented the deal to local union leaders. The agreement is subject to ratification by active members.
The agreement is expected to save Ford $850 million annually on a pretax basis, the UAW said.
Ford is the second automaker to reach a health care agreement with the UAW this year. Last month, General Motors Corp. hourly workers voted for a pact that requires workers and retirees to pay more for their health care.
The UAW said it will now negotiate a similar agreement with DaimlerChrysler AG.
Dearborn-based Ford reported a third-quarter loss of $284 million. The No. 2 U.S. automaker has been struggling to meet its health care obligations as its U.S. market share declines.
Ford spent about $3.1 billion to cover 550,000 hourly and salaried workers, retirees and dependents in 2004, and expects that total to rise to $3.5 billion this year.
The health care agreement is only part of a major restructuring plan Ford expects to announce in January. The company has said job cuts and plant closures will be part of that plan.(Now in Fast Forward speed.)