General Motors Corp. has negotiated a union contract that could cut medical insurance costs by $1 billion per year, and Rick Wagoner, the automaker’s chairman, is asking for the government to do something about health care costs.[@@]
General Motors, Detroit, says in a document filed with the U.S. Securities and Exchange Commission that the proposed agreement with the United Auto Workers, Detroit, announced Monday, could lower company retiree health care liabilities by about 25% of hourly liability or $15 billion.
The agreement would create an independent plan, called a “voluntary employee benefit association.” Employees and retirees affected by General Motors’ benefits cuts could replace some of the lost coverage by paying to join the VEBA, General Motors says.
General Motors will help support the VEBA with 3 contributions of about $1 billion each. The contributions are scheduled to be made in 2006, 2007 and 2011, General Motors says.
The proposed health benefits agreement should cut General Motors’ annual health coverage expenses by about $3 billion before taxes, the company says.
General Motors expects union leaders to ratify the pact this weekend.
Wagoner says in a statement included in the SEC filing that the issue of skyrocketing health coverage costs is still a critical one for the overall competitiveness of American industry in general.
“We would welcome a more proactive role from the elected officials at the state and national levels in broad-based strategies to address the U.S. health care cost crisis,” Wagoner says.
Earlier this month, General Motors announced changes to its health coverage program for salaried workers and retirees who collected salaries while they were on the company’s payroll. The changes will increase the share of health care costs paid by the insureds closer to the share that insureds at competing employers are paying, Wagoner says.
Higher medical co-payment levels and a reduction in the number of salaried workers also will help reduce benefits costs for salaried workers, Wagoner says.
General Motors made the announcement about health benefits costs in conjunction with the release of its third quarter earnings announcement.
The company is reporting a $1.1 billion net loss for the latest quarter on $47 billion in revenue, compared with $315 million in net income on $45 billion in revenue for the third quarter of 2004.
The quarterly loss is the largest General Motors has posted in more than a decade.