GM CEO: High Cost Of Health Care Benefits Are A Drag On Competitiveness

In June, General Motors Chairman and Chief Executive Rick Wagoner told shareholders at the company’s annual meeting that the automaker would be forced to cut 25,000 jobs, in part because of the high cost of providing health care insurance to employees, retirees, and their families. The cost of health benefits alone, Wagoner said, translates to $1,500 per car or truck produced. This year, the company expects to spend around $5.6 billion on health benefits.

"Our $1,500-per-unit health care expense represents a significant disadvantage versus our foreign-based competitors," Wagoner said, according to press reports. "Left unaddressed, this will make a big difference in our ability to compete in investment, technology, and other key contributors to our future success. It is crystal clear that we need to achieve a significant reduction in our health care cost disadvantage, and to do so promptly."

GM is the largest private provider of health care benefits in the U.S., supplying coverage to 1.1 million current employees, dependents, and retirees at an annual cost of nearly $6 billion. GM management and the United Automobile Workers (UAW) union have been engaged in intense negotiations about reducing health care benefits, Wagoner said at the annual meeting, but no agreement has been reached.