GM's UAW Retirees Face
Health Care Costs
Deal Would End Free Coverage
By Amy Joyce, Staff Writer
Friday, October 21, 2005
Some General Motors Corp. retirees, who now pay nothing for health care coverage, will have to pay up to $752 a year in deductibles, co-payments and premiums if a tentative agreement between the auto giant and the United Auto Workers is ratified, union officials said yesterday.
Union representatives were briefed in Detroit yesterday on the changes in health benefits aimed at saving GM $1 billion annually.
The agreement, announced by the company Monday, would increase monthly premiums to $10 for individual retirees and $21 for family coverage. Retirees and active employees currently pay no premiums for health care.
Details of the agreement were released as Ford Motor Co. reported a quarterly loss and announced plans for another overhaul beginning in January. Ford lost $1.2 billion in the third quarter in its core North American division. The automaker said it would initiate "top-to-bottom" job cuts and "significant" plant closings.
The GM health-benefits agreement would provide for a maximum expense on services for retirees of $370 a year for individuals and $752 per family, which includes newly increased deductibles. In addition, retirees would continue to have drug co-payments.
If the agreement is ratified, active UAW GM workers would not get a $1-an-hour pay increase that was to be part of cost-of-living and wage increases in 2006. Starting in December 2006, an additional 2 cents of each quarterly cost-of-living adjustment would be deferred. The UAW's GM contract expires in 2007.
John J. Hollis Sr., a retiree who worked at GM's Baltimore plant for almost 42 years, said he had not expected the plan to be supported by local leaders and was surprised to hear yesterday that it was. "I will definitely speak out against it," he said. "If they agreed to that, they're all crazy. We shouldn't have to pay no kind of premium toward our insurance."
He, like many other retirees who spent their careers at the auto giant, had always assumed the company would take care of him. He had seen his predecessors retire with pensions and full health care coverage. "I figured I dedicated my life to GM all those years, and now all they're doing is taking, taking, taking."
Ronald A. Gettelfinger, the UAW president, and Richard Shoemaker, the vice president who directs the UAW General Motors department, said in a joint statement that the decision was reached after "in-depth analysis of GM's financial situation and intense discussions with GM."
GM pays health care for 750,000 U.S. hourly employees and retirees and their families. Hourly workers pay 7 percent of their total health care bill, while GM's 38,000 salaried workers pay about 27 percent.
The company announced the tentative agreement as it reported that its North American division lost $1.63 billion in the third quarter. The company's overall loss for the year totals $3.81 billion. The plan would not apply to lower-income retirees who have pension incomes of $8,000 or less.
The UAW and GM have been in negotiations for months after G. Richard Wagoner Jr., GM's chairman and chief executive, announced in June that the company would eliminate 25,000 jobs by 2008 and close plants. He maintains that health care is one of the company's largest expenses. The UAW had doubted the need for the cuts and had hired its own outside accountants and attorneys to assess the company's plans.
GM insures 1.1 million Americans and spends $1,500 on health care for each car produced in the United States. Its health care costs in 2004 were $5.2 billion, with $4 billion going to retirees, according to GM.
Some analysts are skeptical that the agreement will have much impact on GM. "This is not the answer," said Kevin Tynan, an analyst with Argus Research Corp. in New York. "You get a GM-UAW deal on this because it's not that painful to the UAW. . . . Anything that's going to make a material impact for GM's cost structure the UAW won't agree to." The union has not set a date for a vote by UAW members, saying it needs to finalize details.