Thursday, July 19, 2007

The UAW Faces Health-Care Cost, Maybe

Apparently, the current GM/UAW negotiations are hung up over retiree-health-care cost questions.

Unfortunately for many retired auto workers, the golden goose has been strangled to death and auto companies can no longer afford the gold-plated “free” lifetime health care benefits they were promised.

And now the day of reckoning that everyone knew was coming - except maybe the car companies and the unions who negotiated this and other unsustainable benefits - is at hand. And it’s not going to be pretty, as current workers are likely going to be forced to accept an agreement to cut the benefits of those who came before them.

The reason? Simple math. There are not more retirees than there are workers, and neither the car companies nor the workers can fit the bill any longer, especially with legacy costs adding anywhere between $1,000 to $1,500 for each vehicle.

The union says it won’t cave on the issue of health care any more than it already has, but in reality if nothing is done then the car manufacturers will eventually go the route of many air carriers and parts suppliers and simply declare bankruptcy, allowing them to shed the crippling costs of their pensions, and more worrisome for former workers, drastically scale back, or totally abandon, their retiree health care payments. Of course, the US taxpayer, through programs like the PBGC and Medicaid would left holding the bag for the costs.


HT: Ankle-Biting Pundits


RAG said...

Dad, one thing I think you're thinking, but haven't quite said, is the current insurance mess really amounts to wanting to hire more firefighters because there are so many more fires rather than starting with an initiative to reduce the number of fires. It only stands to reason that if the latter course isn't pursued you'd just have to keep hiring more and more firefighters.

So it seems that we just keep trying to keep insurance plans aloft without addressing the underlying reasons health care is so unconscionably expensive. If you don't contain costs insurance will just become more costly until, as you point out, it isn't affordable.

A good example of the problem can be seen just down the road from my home where two new hospitals (Aurora and St. Catherine's) are within a stone's throw of each other.

Dad29 said...


It's also like the question of "Tax/Spend." Reduce spending, and that will reduce costs (taxes), both directly and indirectly.

Reduced spending, in the case at hand, means making 'consumers' out of health-care users, to the maximum practical point.