GM to Union: We Need Health Coverage Cutbacks

That was the message in remarks by a top General Motors executive at a speech this week in New York City who suggested that the carmaker would be seeking health benefit cuts from United Auto Workers members, according to a New York Times report.

“We need a competitive plan for all of our employees,” said Gary Cowger, GM head of North American operations, in a speech at the New York International Auto Show, according to the Times. “An across-the-board competitive health care plan for salaried and hourly employees could save us billions of dollars a year.”

According to the Times report, GM is deeply burdened by health care costs with coverage extended to 1.1 million Americans and is the nation’s largest private health care provider, with annual costs of over $5 billion.

However, getting union officials to agree to concessions before the union expires in 2007 would represent a particular challenge – especially since such rollbacks essentially end the generous health benefits that have made jobs at the Big Three automakers among the most sought-after blue-collar work in America. At the three companies, autoworkers have no deductibles or monthly premiums. Salaried workers, however, pay both deductibles and monthly premiums, with the amounts varying depending on the plan. Altogether, GM’s salaried workers pay about 27% of their health care bill, while hourly workers pay about 7%, according to company data.

“We have a very outstanding health care plan for salaried employees,” said Robert Lutz, GM vice chairman,. according to the Times. “We have a different one for UAW members and retirees.” If union workers had a health plan that was “equally excellent” to that of salaried workers, “that would represent substantial, substantial savings,” he said.

Any significant renegotiation of the terms of the labor contract before it expires in 2007 would be highly unusual. Ron Gettelfinger, the president of the union, has made preserving health care benefits his top priority, declaring before contract talks in 2003 that he would not “share costs” with automakers.

However with the domestic auto industry, and particularly GM in dire straits, the union appears to be willing to give bend. In the last round of labor talks in 2003, Gettelfinger did concede modest increases in co-payments for drugs and some doctors’ visits.

In any event, Lutz said the company would keep talking to the union. “They know it’s a critical issue for the company and we know that they know,” he said.” It’s very difficult to say how or where this is going to go, but we have to maintain the dialogue and impress upon our partners how important this is.”