Editorial An Unhealthy Trend Is Emerging As GM Cuts Health Benefits

There’s an old saying that goes something like; ‘as GM goes, so goes the nation.”


Let’s hope not.

Faced with a $1.63 billion third-quarter loss, General Motors is responding with a cost-cutting program not seen in Detroit in decades. A big piece of that package is health care benefits.

Indeed, the automaker announced last week that it will slash health care coverage for unionized retirees. The move, subject to ratification from union members and court approval, was a major concession for an embattled UAW, but there may be more to come as negotiations continue with current workers, who face the prospect of paying a much larger share of their health care insurance.

The frightening thing about the GM cuts is that they are certain to be emulated, not only by other automakers — Ford is already in talks about cutting health care benefits and Daimler-Chrysler has hinted likewise — but by corporations and small companies across the country.

And that’s why what’s happening in Detroit provides new evidence that the country needs to come to grips with the fact that it needs some kind of universal health plan that makes care affordable for everyone, and doesn’t place companies in a situation where they are choosing between cutting jobs or slashing health benefits.
In many ways, GM’s move to reduce retirees’ health care benefits was not surprising — and in some ways it actually makes sense.

American carmakers are being pushed to the limit by foreign makers like Toyota and Honda, and U.S. companies have been slow to respond to the now-pronounced demand for smaller, more fuel-efficient models. In fact, instead of moving away from SUVs and other poor-mileage vehicles, GM and other American makers are responding instead by offering buyers $500 in gas and other incentives.

Meanwhile, American labor has seemingly never been weaker or more divided, and this is evidenced by the concessions made by the unions representing airline workers, major manufacturers, grocery store chains, and now, the auto industry.

And with the soaring cost of health insurance today, major corporations and mom-and-pop businesses alike are looking in that direction when they want to cut costs. Ask any business owner in the Pioneer Valley about the challenges in operating their venture and about the rising cost of doing business and they will start — and sometimes end — with the subject of health care coverage.

Why are cuts to health benefits so alarming? For starters, when individuals have to pay a higher percentage of the cost of their care, they will likely seek less care. This means fewer checkups and less preventative health care, which means bigger, more expensive problems to be dealt with down the road.

Also, once companies start taking away hard-earned health care benefits — for either retirees or current workers — it is very difficult to gain them back. In fact, many union leaders would say that cuts made now are only the beginning of a slide that will likely worsen.

Retirees are upset with GM for reneging on a contract inked many years ago, one that provided some of the best health coverage available anywhere. They should be equally upset, if not more so, with a system that forces corporations to choose between shutting down plants and shaving percentage points off the amount of health care coverage.

Fixing the health care system in this country and eliminating such hard choices will be as difficult as getting GM and other U.S. automakers in a position where they can effectively compete with foreign makers.

Maybe it’s time to start getting to work on both of those assignments. On second thought, there’s no ‘maybe’ about it.

Because if we don’t, what’s going on at GM, Boeing, and Unisys — and will soon be happening at Ford and Chrysler if the auto industry’s history of pattern bargaining continues — will become the accepted response to companies forced to tighten their belts.

As one observer put it, UAW-GM had to choose between ‘bad’ (cutting retirees’ health benefits) and ‘worse,’ meaning deeper cuts down the road, and chose ‘bad.’ Other unions — and other companies — will have to make similar choices, and that’s bad for everyone.