" The Road Ahead for the US Auto Industry..
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" The Road Ahead for the US Auto Industry..
U.S. Commerce Dept's analysis and predictions:
The Centers for Medicare and Medicaid Services reported that the overall cost of health care doubled from 1993 to 2004. No relief appears in sight. Total health spending
is estimated to increase at an annual rate of 7.2 percent over the next ten years.
The root of the healthcare burden for the Detroit 3 lies in two parts – the rapidly rising costs (see above) and the heavy burden of legacy costs for retirees. General Motors currently provides for health care for 1.1 million Americans. However, less than 200,000 of those receiving benefits are current GM employees. The rest are either employee dependents or retirees. Ford and Chrysler have similar problems, as they now pay for the health care for approximately 550,000 and 375,000 individuals, respectively.
The foreign manufacturers do not face these same health care costs, giving them a large cost advantage. Nearly all competitors are based in countries that have national health care systems, giving these companies the benefit of a large number of workers for whom health care is already provided.
Even those which have production plants in the United States do not face
the same kind of legacy costs that the Detroit 3 have. They generally
have a younger workforce and have far fewer retirees on the books. Nonetheless, as the number of their U.S. employees and retirees grows, international automakers with U.S. operations are concerned about rising costs. Nissan, who has approximately 500 U.S. retirees, recently announced it is taking steps to cut costs to “remain competitive” by limiting healthcare coverage for its U.S.-based retirees and no longer paying a guaranteed monthly pension to new hires.
The burden of U.S. healthcare costs is a cross-sectional problem that needs to be addressed at a national level. The Detroit 3 agree that some sort of federal government solution is needed. In a February 2006 speech, GM’s CEO Rick Wagoner supported the establishment of a ‘consumer driven” health system and advocated for a national plan to address catastrophic health expenses, which account for 30 percent of health care costs.”
The UAW is in favor of a single-payer national health insurance. In the meantime, the Detroit 3 and labor are taking steps to lessen the cost burden on the auto companies.
In October 2005, after six months of discussions, General Motors and UAW leaders reached an unprecedented agreement to cut its annual healthcare expenses by $3 billion before taxes, and save the company about $1 billion in cash annually. It is the largest single cost-cutting initiative ever announced by GM and the biggest labor concessions in the U.S. auto industry since the former Chrysler was on the verge of bankruptcy in the early 1980’s. As part of the plan, GM’s 118,000 active hourly workers will defer a $1- an-hour pay increase in September 2006 to health coverage and pay larger co-payments for prescription drugs.
GM’s 500,000 retirees, surviving spouses and dependents will
pay a larger share of their health insurance premiums. The agreement, which was approved by workers in November 2005, will reduce approximately $15 billion from GM’s future retiree healthcare liability, currently $61 billion for hourly retirees and $77 billion including salary retirees. The terms also include GM contributing $1 billion in 2006, 2007 and 2011 to help fund a new Voluntary Employee Benefit Association. This fund will be administered by the UAW, and is intended to help ease the impact of GM’s reductions in coverage for hourly retirees. In December 2005, the UAW reached a similar deal with Ford that will reduce the
automaker’s health care expenses by $850 million. UAW retirees will pay higher
premiums and co-payments up to an annual maximum of $752. Current employees will spend more on prescription drugs. In return, Ford committed to invest an additional $900 million in product innovation and technology over the next five years. As of March 2006, DaimlerChrysler was still in talks regarding healthcare benefits with the UAW, and also was considering cutting back health care benefits for its salary employees. Each of the companies’ agreements with the union will eventually require the approval of a federal judge. Pension Costs Pension funds are another cost burden for the Detroit 3, particularly compared to their foreign competitors. The annual cost of pension obligations for the Detroit 3 is estimated to be at least $2 billion. GM, with 500,000 retirees, has approximately 2-1/2 retirees for
every active worker. Honda, which opened its first auto plant in the United States in 1982, only has approximately 1,500 U.S.-based retirees. Some analysts say that having to support a much larger number of retirees makes the difference in the Detroit 3’s production costs relative to the ir competitors. In addition, in other markets, an automakers’ responsibility for health insurance and pensions stops when an employee reaches retirement age. To help reduce costs and attract younger employees who prefer their retirement money to be portable, the Detroit 3 have replaced pensions for salaried workers hired after a particular date with retirement savings accounts.
GM is currently disputing the federal government’s claim that its pension fund is $31 billion short of what it owes its work force and retirees (approximately 600,00). GM claims it has $2 billion more than it needs to cover anticipated benefits. The New York
Times reported that both estimates are within accepted accounting practices.
is estimated to increase at an annual rate of 7.2 percent over the next ten years.
The root of the healthcare burden for the Detroit 3 lies in two parts – the rapidly rising costs (see above) and the heavy burden of legacy costs for retirees. General Motors currently provides for health care for 1.1 million Americans. However, less than 200,000 of those receiving benefits are current GM employees. The rest are either employee dependents or retirees. Ford and Chrysler have similar problems, as they now pay for the health care for approximately 550,000 and 375,000 individuals, respectively.
The foreign manufacturers do not face these same health care costs, giving them a large cost advantage. Nearly all competitors are based in countries that have national health care systems, giving these companies the benefit of a large number of workers for whom health care is already provided.
Even those which have production plants in the United States do not face
the same kind of legacy costs that the Detroit 3 have. They generally
have a younger workforce and have far fewer retirees on the books. Nonetheless, as the number of their U.S. employees and retirees grows, international automakers with U.S. operations are concerned about rising costs. Nissan, who has approximately 500 U.S. retirees, recently announced it is taking steps to cut costs to “remain competitive” by limiting healthcare coverage for its U.S.-based retirees and no longer paying a guaranteed monthly pension to new hires.
The burden of U.S. healthcare costs is a cross-sectional problem that needs to be addressed at a national level. The Detroit 3 agree that some sort of federal government solution is needed. In a February 2006 speech, GM’s CEO Rick Wagoner supported the establishment of a ‘consumer driven” health system and advocated for a national plan to address catastrophic health expenses, which account for 30 percent of health care costs.”
The UAW is in favor of a single-payer national health insurance. In the meantime, the Detroit 3 and labor are taking steps to lessen the cost burden on the auto companies.
In October 2005, after six months of discussions, General Motors and UAW leaders reached an unprecedented agreement to cut its annual healthcare expenses by $3 billion before taxes, and save the company about $1 billion in cash annually. It is the largest single cost-cutting initiative ever announced by GM and the biggest labor concessions in the U.S. auto industry since the former Chrysler was on the verge of bankruptcy in the early 1980’s. As part of the plan, GM’s 118,000 active hourly workers will defer a $1- an-hour pay increase in September 2006 to health coverage and pay larger co-payments for prescription drugs.
GM’s 500,000 retirees, surviving spouses and dependents will
pay a larger share of their health insurance premiums. The agreement, which was approved by workers in November 2005, will reduce approximately $15 billion from GM’s future retiree healthcare liability, currently $61 billion for hourly retirees and $77 billion including salary retirees. The terms also include GM contributing $1 billion in 2006, 2007 and 2011 to help fund a new Voluntary Employee Benefit Association. This fund will be administered by the UAW, and is intended to help ease the impact of GM’s reductions in coverage for hourly retirees. In December 2005, the UAW reached a similar deal with Ford that will reduce the
automaker’s health care expenses by $850 million. UAW retirees will pay higher
premiums and co-payments up to an annual maximum of $752. Current employees will spend more on prescription drugs. In return, Ford committed to invest an additional $900 million in product innovation and technology over the next five years. As of March 2006, DaimlerChrysler was still in talks regarding healthcare benefits with the UAW, and also was considering cutting back health care benefits for its salary employees. Each of the companies’ agreements with the union will eventually require the approval of a federal judge. Pension Costs Pension funds are another cost burden for the Detroit 3, particularly compared to their foreign competitors. The annual cost of pension obligations for the Detroit 3 is estimated to be at least $2 billion. GM, with 500,000 retirees, has approximately 2-1/2 retirees for
every active worker. Honda, which opened its first auto plant in the United States in 1982, only has approximately 1,500 U.S.-based retirees. Some analysts say that having to support a much larger number of retirees makes the difference in the Detroit 3’s production costs relative to the ir competitors. In addition, in other markets, an automakers’ responsibility for health insurance and pensions stops when an employee reaches retirement age. To help reduce costs and attract younger employees who prefer their retirement money to be portable, the Detroit 3 have replaced pensions for salaried workers hired after a particular date with retirement savings accounts.
GM is currently disputing the federal government’s claim that its pension fund is $31 billion short of what it owes its work force and retirees (approximately 600,00). GM claims it has $2 billion more than it needs to cover anticipated benefits. The New York
Times reported that both estimates are within accepted accounting practices.
Last edited by 90rocz; Mar 19, 2007 at 12:08 AM.
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"Nissan, who has approximately 500 U.S. retirees, recently announced it is taking steps to cut costs to “remain competitive” by limiting healthcare coverage for its U.S.-based retirees and no longer paying a guaranteed monthly pension to new hires."
Yes it seems like Nissan has a huge problem and needs to take steps to remain competitive.... Holy Crap no wonder GM is having trouble competing they have 1000 retirees for every one at Nissan.
Yes it seems like Nissan has a huge problem and needs to take steps to remain competitive.... Holy Crap no wonder GM is having trouble competing they have 1000 retirees for every one at Nissan.
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Posts: 3,180
From: Yadkinville, NC USA
"Nissan, who has approximately 500 U.S. retirees, recently announced it is taking steps to cut costs to “remain competitive” by limiting healthcare coverage for its U.S.-based retirees and no longer paying a guaranteed monthly pension to new hires."
Yes it seems like Nissan has a huge problem and needs to take steps to remain competitive.... Holy Crap no wonder GM is having trouble competing they have 1000 retirees for every one at Nissan.
Yes it seems like Nissan has a huge problem and needs to take steps to remain competitive.... Holy Crap no wonder GM is having trouble competing they have 1000 retirees for every one at Nissan.
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I just saw a commercial on TV where Toyota bosted that it has created 8,000 jobs in the US. I have also seen a report from the Us labor board the in the last 10 years 800,000 Automotive jobs have been lost. i geuss in Japan one plus is better than 100 negitives. :/
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From: Nashville, TN
So the only way to save GM is for ALL of us to accept socialized medicine?
No, that author has no agenda.
No, what is needed is for consumers to be more responsible for the cost of the services they use & the volume of services they use. The only thing the govt needs to do is stay the hell out of it.
Personally I'm not willing to accept the massive taxation that would be required to fund such a govt run plan. You're just shifting the costs from employers to taxpayers, which is just a shell game.
What is needed is to fundamentally change the way healthcare is delivered.
I get tired of this "we overcommited in the past so now we want the government (which is code for taxpayers) to bail us out".
You know what? Yeah, you have huge legacy costs. Who's fault is that? It sure as hell isn't mine.
Why does GM have to wait for the Govt to do something? GM is fully capable of creating its own catastrophic insurance policy and coupling that with HSAs and offering that as an option or the ONLY option to its employees and pensioners.
They change the plans here every year....I don't have a right to employer paid healthcare, it is a benefit, or perk. They're paying for most of it, they can structure it any way they want.
No, that author has no agenda.
The burden of U.S. healthcare costs is a cross-sectional problem that needs to be addressed at a national level. The Detroit 3 agree that some sort of federal government solution is needed. In a February 2006 speech, GM’s CEO Rick Wagoner supported the establishment of a ‘consumer driven” health system and advocated for a national plan to address catastrophic health expenses, which account for 30 percent of health care costs.”
Personally I'm not willing to accept the massive taxation that would be required to fund such a govt run plan. You're just shifting the costs from employers to taxpayers, which is just a shell game.
What is needed is to fundamentally change the way healthcare is delivered.
I get tired of this "we overcommited in the past so now we want the government (which is code for taxpayers) to bail us out".
You know what? Yeah, you have huge legacy costs. Who's fault is that? It sure as hell isn't mine.
Why does GM have to wait for the Govt to do something? GM is fully capable of creating its own catastrophic insurance policy and coupling that with HSAs and offering that as an option or the ONLY option to its employees and pensioners.
They change the plans here every year....I don't have a right to employer paid healthcare, it is a benefit, or perk. They're paying for most of it, they can structure it any way they want.
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If the only way to keep the the big two domestics alive is to force the entire U.S. into socialized health care then I say "let them die out". Not even the auto industry which I love and am a part of is so important that we need to screw everybody. Ford and GM need to stop looking to the government and my wallet to solve the problems it and the union created.
Anyone who is a proponent of socialized health care in order to save the domestic auto industry is being exteemly short-sighted.
Anyone who is a proponent of socialized health care in order to save the domestic auto industry is being exteemly short-sighted.
Last edited by Robert_Nashville; Mar 19, 2007 at 11:25 AM.
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It's isn't Toyota's or any other manufacturere's responsibility to "replace" all the "Automotive Jobs" that have been lost (whatever than number actually is).
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I'm on board with you on the idea that healthcare needs to be more competitive than what it is. Personally, I'm not sure HSA's/HDHC (high deductible healthcare ala catastrophe insurance) is the answer. I speak from first-hand experience. Have you looked into the cost of HDHC? It is *at least* 3/4 of the cost of traditional healthcare -- I should know, I just looked into that very scenario recently. My family is very healthy, w/o any serious healthcare issues and that's the best an insurance company can do? How many people would do this:
1) Pay a monthly premium to have your family covered under a conventional plan.
2) Pay 3/4 of that premium & then pay all healthcare expenses, including prescriptions out of pocket (pretax) upto the limit of the family limit of $5250/year? On top of that, you are required to keep a minimum balance in your HSA. In fairness, the money does carry over to the next year -- but you can only use it for healthcare expenses.
I don't know about you, but with healthcare and prescriptions BOTH rising at double-digit percentages every-year, taking on that payment isn't exactly the keenest of ideas -- for only a 25% gain in your healthcare premium. I factored the costs out for my family and we'd lose THOUSANDS each and every year.
I think the problem is that healthcare is a closed market. Look at United Healthcare. Their CEO (William McGuire) made off with $1.2 BILLION -- as a bonus -- for just last year. If the healthcare ins. industry had healthy competition, you wouldn't be able to afford to pay your CEO that kind of sum. The fact of the matter is that corporations have donated enough cash to our politicians (both sides of the aisle) to have legislation catered that makes it difficult, if not impossible for competition to gain a foothold in their marketspace. Each and everyone of us pay the price on this issue. Same thing with oil: who *couldn't* undercut an Exxon-Mobile? How many billion did they make in profit last year? Think of how many tax-shelters are available to a buisness -- and after each and every one of those were exhausted, Exxon Mobile still reported billions upon billions of profit last year.
1) Pay a monthly premium to have your family covered under a conventional plan.
2) Pay 3/4 of that premium & then pay all healthcare expenses, including prescriptions out of pocket (pretax) upto the limit of the family limit of $5250/year? On top of that, you are required to keep a minimum balance in your HSA. In fairness, the money does carry over to the next year -- but you can only use it for healthcare expenses.
I don't know about you, but with healthcare and prescriptions BOTH rising at double-digit percentages every-year, taking on that payment isn't exactly the keenest of ideas -- for only a 25% gain in your healthcare premium. I factored the costs out for my family and we'd lose THOUSANDS each and every year.
I think the problem is that healthcare is a closed market. Look at United Healthcare. Their CEO (William McGuire) made off with $1.2 BILLION -- as a bonus -- for just last year. If the healthcare ins. industry had healthy competition, you wouldn't be able to afford to pay your CEO that kind of sum. The fact of the matter is that corporations have donated enough cash to our politicians (both sides of the aisle) to have legislation catered that makes it difficult, if not impossible for competition to gain a foothold in their marketspace. Each and everyone of us pay the price on this issue. Same thing with oil: who *couldn't* undercut an Exxon-Mobile? How many billion did they make in profit last year? Think of how many tax-shelters are available to a buisness -- and after each and every one of those were exhausted, Exxon Mobile still reported billions upon billions of profit last year.
Last edited by cmutt; Mar 19, 2007 at 12:24 PM.
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I think the point is that you pay for it either way. One way is directly through premiums, deductibles and copays, or indirectly through massive taxation to fund a govt insurance program.
Changing how many hands touch the money before it gets paid to your doctor isn't going to do jack to actually reduce costs. Govt payer systems certainly don't incentivize indivuduals to cut back on overuse of healthcare, or to shop around perscriptions or procedures. And on the far end, govt caps on prices just hurt the providers and you end up with doctor shortages like they have in Canada and the UK.
Changing how many hands touch the money before it gets paid to your doctor isn't going to do jack to actually reduce costs. Govt payer systems certainly don't incentivize indivuduals to cut back on overuse of healthcare, or to shop around perscriptions or procedures. And on the far end, govt caps on prices just hurt the providers and you end up with doctor shortages like they have in Canada and the UK.
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Actually, "National Health Care" (the term "Socialized Medicine" is only used by the Limbaugh, Black-UN-Helecopter, all-government-is-evil crowd make it sound communist) really IS the only way for the US industry to remain competitive with seemingly every other westernized country that also has a form of nationalized health care.
There hasn't been an intellegent alternative proposed here on these pages, or anywhere else save government regulated healthcare pricing. The only thing you hear as alternatives ranges from "tax breaks" (which is silly because it's still goverment actually footing the bill, it just leaves the opportunity for loopholes to be exploited) and simply throwing people off and leaving them to fend for themselves (which is downright retarded if not assinine).
The idea that everyone is going to have to pay if the government takes over is also pretty silly because we're all paying anyway. Emergency room costs are so high because of those who can't pay. Medicine costs are driven strictly on what the market can pay and isn't held in check by any type of regulations.
Why is health insurence spirialing out of control here in the US, but not so much anywhere on the planet? a combination of government Health Insurence and regulations.
No one is talking about the old European style of health care coverage, where everything is paid for everybody. But a system that establishes basic coverage for the very young and the very sick, or at least system that kicks in for catostrophic illness (both types came very close to passage here in the US), combined with regulations governing perscription prices and HMO oversight is more than enough to do the trick, is reasonable in costs, and continues to let the health care industry (the only industry creating jobs in the US over the past number of years) survive.
The anti-tax, anti-government types will cry foul at anything that involves government spending on health care and have a paranoia on anything involving taxes. A couple of billion per year put towards health care will mean our taxes will crush us all into dust, yet that $52+ billion per year we're dumping into that rat-hole called Iraq isn't going to affect our taxes one bit? All taxes are bad, but roads & bridges fix themselves, schools make their own money, prisons & police cost taxpayers zip, the planes our families ride flies the skys without any need for government involvement or regulation, and neither does the food we eat or the water we drink or the buildings we live in.
Oh..... and we don't need government involvement in the one thing that's even more important than all the above....the ability of it's citizens to get decent health care unless it lines the pockets of "non-government" individuals who, as have been proved over and over again, will keep OUR best intrests at heart. All we have to do is leave them alone, and keep the government away and their money (which will have those unpleasent accountability rules attached).
There hasn't been an intellegent alternative proposed here on these pages, or anywhere else save government regulated healthcare pricing. The only thing you hear as alternatives ranges from "tax breaks" (which is silly because it's still goverment actually footing the bill, it just leaves the opportunity for loopholes to be exploited) and simply throwing people off and leaving them to fend for themselves (which is downright retarded if not assinine).
The idea that everyone is going to have to pay if the government takes over is also pretty silly because we're all paying anyway. Emergency room costs are so high because of those who can't pay. Medicine costs are driven strictly on what the market can pay and isn't held in check by any type of regulations.
Why is health insurence spirialing out of control here in the US, but not so much anywhere on the planet? a combination of government Health Insurence and regulations.
No one is talking about the old European style of health care coverage, where everything is paid for everybody. But a system that establishes basic coverage for the very young and the very sick, or at least system that kicks in for catostrophic illness (both types came very close to passage here in the US), combined with regulations governing perscription prices and HMO oversight is more than enough to do the trick, is reasonable in costs, and continues to let the health care industry (the only industry creating jobs in the US over the past number of years) survive.
The anti-tax, anti-government types will cry foul at anything that involves government spending on health care and have a paranoia on anything involving taxes. A couple of billion per year put towards health care will mean our taxes will crush us all into dust, yet that $52+ billion per year we're dumping into that rat-hole called Iraq isn't going to affect our taxes one bit? All taxes are bad, but roads & bridges fix themselves, schools make their own money, prisons & police cost taxpayers zip, the planes our families ride flies the skys without any need for government involvement or regulation, and neither does the food we eat or the water we drink or the buildings we live in.
Oh..... and we don't need government involvement in the one thing that's even more important than all the above....the ability of it's citizens to get decent health care unless it lines the pockets of "non-government" individuals who, as have been proved over and over again, will keep OUR best intrests at heart. All we have to do is leave them alone, and keep the government away and their money (which will have those unpleasent accountability rules attached).
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There are very, verfy few things that any government, no matter how well intentioned, can do well or do better than the private sector...you need look no further than our gerat program to end poverty in this country; 30 years and trillions of dollars later we have almost exaclty the same % of truly poor in this country as we did when the great wellfare state started...had the government simply taken all that money and paid people outright they would have had far more positive impact on society than the way it was done.
Of that list of things government can do that the private sector can't, you will not find health-care on it; in fact, health-care would be near the top of the list of things government should stay the hell away from.
Despite all the hand-wringing and crying to the contrary, the real problem with health-care and its ever rising cost is very, very simple; the problem is that those who receive the car are totally removed form the payment for and the cost of that care.
Were people held responsible for their own health care costs and free-market purssures were brought to bear on the health care industry you would see health care costs brought under control.
Whatever name you want to put on and no matter how much you want to believe "our" system would be better than Canada or the UK you need look no further than the VA to see how government runs health care...if that doesn't scare you away from it then I don't know what will.
Of that list of things government can do that the private sector can't, you will not find health-care on it; in fact, health-care would be near the top of the list of things government should stay the hell away from.
Despite all the hand-wringing and crying to the contrary, the real problem with health-care and its ever rising cost is very, very simple; the problem is that those who receive the car are totally removed form the payment for and the cost of that care.
Were people held responsible for their own health care costs and free-market purssures were brought to bear on the health care industry you would see health care costs brought under control.
Whatever name you want to put on and no matter how much you want to believe "our" system would be better than Canada or the UK you need look no further than the VA to see how government runs health care...if that doesn't scare you away from it then I don't know what will.
Last edited by Robert_Nashville; Mar 19, 2007 at 03:48 PM.
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Nobody is being denied health care Guy, nobody is turned away, its illegal to do so in fact.
Yes we're all paying already, which is sort of my point. So lets all continue to pay outrageous amounts, only now to the govt instead of insurance companies, and then add several new layers of govt red tape to the process and then factor in the govt's stellar ability to regulate everything else in the world (ever notice how long distance is a lot cheaper now than when it was regulated?)
No thanks.
Yes we're all paying already, which is sort of my point. So lets all continue to pay outrageous amounts, only now to the govt instead of insurance companies, and then add several new layers of govt red tape to the process and then factor in the govt's stellar ability to regulate everything else in the world (ever notice how long distance is a lot cheaper now than when it was regulated?)
No thanks.
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From: SeVa
Same thing with oil: who *couldn't* undercut an Exxon-Mobile? How many billion did they make in profit last year? Think of how many tax-shelters are available to a buisness -- and after each and every one of those were exhausted, Exxon Mobile still reported billions upon billions of profit last year.