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March 29, 2005
GM Turning to UAW on Healthcare Costs
Executives at General Motors, confronted with the automaker's worst financial outlook in a decade, want union members to accept the same cuts in healthcare benefits already endured by white-collar workers. Good luck, say analysts.

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Gary Cowger, GM's head of North American operations, outlined management's intentions in a speech last week at the New York International Auto Show. "We need a competitive plan for all of our employees," he said. "An across-the-board competitive health care plan for salaried and hourly employees could save us billions of dollars a year."

Cowger's remarks came a week after GM said the first quarter would be its second consecutive losing quarter. According to the New York Times, the company sharply lowered earnings projections for 2005, sending its stock to its lowest level in more than 10 years.

One reason for the downturn is GM's eroding share of the market for large pickup trucks and SUV's, which tend to be highly profitable for automakers, the Times reports. But GM is also the nation's largest private health care provider, covering 1.1 million Americans, or about 0.4 percent of the population. Its annual costs as a provider exceed $5 billion.

And that's where management is looking for savings. As the Times notes, unionized employees of the so-called Big Three automakers "have health care benefits that are the envy of many Americans, with no deductibles or monthly premiums." It's different for salaried workers, however; they pay both deductibles and monthly premiums, with the amounts varying depending on the plan.

Citing company data, the Times reports that GM's salaried workers pay about 27 percent of their health care bill, while hourly workers pay about 7 percent.

But getting the United Auto Workers to go along with that will be difficult, particularly since their current contract with GM lasts until 2007.

"It's going to be a tough sell," Harley Shaiken, a professor specializing in labor issues at the University of California at Berkeley, told the Reuters news agency.

Besides being rare, such a "reopener" would mean putting a revised contract up to ratification by GM's entire UAW work force--a move that could open the door to a strike, analysts told Reuters.

"This isn't something that one or two quarterly profit statements are going to have the political weight to bring across," Shaiken said. "This is not going to be something that just happens either at a moment's notice or without any opposition."

But analysts also noted that UAW President Ron Gettelfinger is seen as a pragmatist who understands the realities of a cutthroat industry and the need for U.S. automakers to stay competitive to preserve UAW jobs.


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