AFSCME 3357-HOF'S BLOG

Carmakers and the Health Care Crisis

In a capitalist economy, American automakers are struggling with profitability because they are set up to make a profit, but also to provide social welfare functions that are performed by the government in other countries. They want relief from this predicament. It is surprising but the automakers and the UAW have both come out in favor of John Kerry, even though he has a track record of endorsing fuel economy standards that the auto companies don't want. They think that Kerry's more activist position on health care is strong enough to make up the difference.

The New York Times article linked below (free registration required) illustrates the problem beautifully. Here are some highlight quotes.

Ernest Pusey is older than General Motors.
At 109, he once helped build the Stovebolt Six, a heavy cast iron engine that propelled Chevrolets across America, but it has been nearly half a century since he retired from G.M. and moved to Florida. Today, he is one of 240 G.M. retirees or spouses over 100 years old. All of them are older than G.M. itself, which is four years from its centennial.

. . .

For G.M., the nation's largest private purchaser of health services and of drugs from Viagra to Lipitor, the projected cost of providing health care benefits to current and future retirees like Mr. Pusey is a staggering $63 billion.

. . .

G.M. covers the health care costs of 1.1 million Americans, or close to half a percent of the total population, though fewer than 200,000 are active workers while the rest are retirees, children or spouses. Not only are such costs escalating rapidly, but G.M.'s rivals, based in Japan and Germany, have virtually no retirees from their newer operations in the United States and, at home, the expenses are largely assumed by taxpayers through nationalized health care systems.

The New York Times > Business > Carmakers Face Huge Retiree Health Care Costs

In my opinion, when we talk about competitiveness, we need to look at putting costs where costs belong. The tie between healthcare is a historical accident tracing to the inability to compete for labor in World War II due to the wage freeze in plaze at that time. There is no logical relationship between employment and healthcare. The free riders in our system don't just include the people who get treated in emergency rooms without insurance and without the ability to pay, companies who don't pay for health insurance in their home markets but import their cars into the US are also free riders. Ditto for the companies who cherry pick a young workforce in non-union states, they also benefit unfairly from the current system.