Wednesday, June 15, 2005

GM pushing Union on healthcare cuts...

Following up on this post from 08-Jun, General Motors has given UAW until the end of June to either accept broad cuts in healthcare coverage, or the auto giant would implement those cuts unilaterally.

The International Herald Tribune (from the NYTimes) is reporting here that local union officials say they are willing to accept cuts, but not to the level proposed - and any unilateral implementation of cuts would force a strike.
Since GM spends nearly $6 billion on health care annually, many investors and financial analysts see cutting back on benefits as an important step in restoring the company to financial health. GM covers 1.1 million Americans, including workers, retirees and family members, making it the largest private provider of medical benefits in the United States.
But would this really restore the company to financial health? Over at ACSblog, Prof. Katherine Stone, professor of employment law at UCLA School of Law, has this interesting post commenting on GM - and more generally on the future of 'big manufacturing' in America. In it she comments:

It raises the question, is the U.S. auto industry still viable? And more fundamentally, is big manufacturing still viable in the U.S., and if so, under what terms? ...
General Motors' health and retirement plans were initially negotiated between GM and its union, the United Auto Workers Union, during World War II, when the government froze wages but permitted unions to bargain over other issues, giving unions an incentive to make gains in other areas. In the subsequent decades, the UAW and GM have continued to negotiate to to devote a large portion of the wage package to benefits GM's pension and health insurance were part of an employment system in which all large U.S. firms wanted long term employees and promised stable jobs with rising earnings and good lifetime benefits. At that time, firms faced relatively stable product markets and wanted stability in their workforce. Hence health and pension benefits were structured to encourage employees to stay on their jobs. Pensions had long vesting periods and health insurance continued into retirement.

Now companies no longer want long-term employees. Instead, they want the flexibility in order to increase or decrease their labor force as product market conditions change. GM has cut its U.S. work force from a high of 600,000 in 1979 to less than 140,000 this year. It has moved many of its core activities to the auto parts firms, where there are more flexible employment practices. ...
The question that the General Motors' layoffs raises is, can large U.S. companies that have industrial unions and generous negotiated benefit packages survive? The answer is, maybe, but only if they can rein in their health care costs. Efforts to shift costs onto employees or cut back on health benefit coverage has meet with intense opposition. The alternative is to shift the cost to the government. General Motors' competitors in Germany, Japan, and the United Kingdom all have national health systems to pay for their workers' health care needs. Fair trade requires a fair playing field, and so we need to level our field upward if we want to compete. The lesson of the General Motors' impending doom is that national health insurance is not some socialist pipedream but good policy for American business. After all, as General Motors Chairman Charlie Wilson told the U.S. Senate in 1955, "What is good for General Motors is good for America."

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