Monday, May 14, 2007

Restoring Health By Shedding Health Benefits

Wal-Mart's CEO H. Lee Scott said last year that GM is no longer an automotive company, but a benefits company that sells cars to fund those benefits.

Now distressed carmaker Chrysler is being sold and the prospective new owners hope that UAW concessions on health benefits restore the company's health.

You may have heard that health and other benefits to retirees and current staff place an extra $2000 burden per car for the Detroit Big Three as compared to their Japanese competitors. The WSJ article describes this another way - as a $30 per hour advantage that Toyota has over US makers that may increase to $45 per hour if the present arrangements continue.

Since a large chunk of these costs comes from healthcare, it strengthens the case for reforms like bringing healthcare costs down and also having healthcare for all (including workers) paid through public funds with all employers required to chip in.

But there's also a specific proposal in the current discussions for the UAW to be given a lumpsum of billions of dollars and then be required to manage the health benefits for its own members. Such a step should be welcomed. Direct responsibility will make the unions more supportive of innovative measures that can drastically reduce healthcare costs, especially if they maintain or improve quality.

We can talk about these steps subsequently. The point is, it will be good to see strong consumer groups pushing for healthcare reforms instead of just having key industry players resisting them.


kenrod said...

The Big three in Detroit only use the health issue as a sideshow for their own inadequacies. Toyota makes most of its American sales from its Kentucky plant, where they have to pay for health insurance anyway. It's the unions that have broken Detroit with their excessive demands. Also Detroit's management is to blame because of has too many divisions catering to many of the same consumer. GM should certainly get rid of either Chevy or Caddy.

Sandip Madan said...

Good points, Kenrod. The management and the unions in whatever order share responsibility for Detroit's current ills. It is good that at least they are finally trying to work together to control their overhang of health and benefits costs.

Cybil said...

Thanks for writing this.