Ford wants to match GM cuts
No. 2 automaker can't afford to let GM get a competitive edge if UAW OKs health care cuts.
By Eric Mayne / The Detroit News
Greg Smith
Ford Motor Co. is prepared to seek any significant concessions rival General Motors Corp. negotiates with the UAW to reduce health care expenses, according to the head of the automaker's North and South American operations.
Greg Smith, executive vice president and president of Ford's operations in the Americas, said Ford cannot allow GM to gain a competitive edge in the North American market.
The UAW has a long-standing practice of negotiating matching contracts with Detroit automakers to put its members on equal financial footing.
"If they made a significant settlement for one company than it would apply to others," Smith said. "We would expect that if there is some significant change to what was a pattern agreement, we would go in and see."
GM and the UAW are struggling to negotiate a deal that would reduce GM's staggering health care tab -- $5.6 billion this year and $77 billion long-term -- and aid the automaker's turnaround efforts.
Top UAW leaders face enormous pressure from GM workers and retirees to preserve their generous health care benefits.
While the UAW has declined to reopen its current contract with GM, the company's competitors are concerned the No. 1 automaker will turn its health care cost burden into a bargaining advantage.
Ford spent $3.1 billion on health care in 2004 -- down from $3.2 billion in 2003 -- but expects 2005 spending to rise 9 percent.
GM wants to cut the amount of money it spends on health care -- about $1,500 per vehicle -- by a third, or by $1 billion this year and another $1 billion in 2006.
DaimlerChrysler AG's Chrysler Group, which has received permission to raise deductibles of hourly workers enrolled in some Preferred Provider Organization, is prepared to demand matching concessions, too.
"You can't give one guy a competitive advantage," Chrysler Group spokesman Jason Vines said.
Both automakers have seen U.S. sales and market share dip this year because of major inroads from Asian rivals.
But GM has largely blamed soaring health care costs for its latest financial woes.
It lost $1.1 billion in the first quarter and is withholding earnings guidance for the remainder of the year because of uncertainty over talks with the UAW.
GM wants relief from obligations to provide health care benefits for hourly employees and retirees - two groups that total more than 450,000. The company's options include the elimination or reduction in retiree benefits, higher co-payments for active employees and the adoption of monthly premiums.
GM Chairman Rick Wagoner told shareholders earlier this month that the automaker is committed to reducing its health care costs and is prepared to act alone if talks with the UAW fall short.
At GM, hourly workers cover about 7 percent of their annual health car costs while salaried employees cover 27 percent. Nationwide, the typical private employee pays for 32 percent of his or her annual health care.
UAW officials are willing to help GM, but not to the extent of reopening the master agreement that forms the pattern for all three companies. And they have warned it would be a "huge mistake" for the automaker to take any unilateral action on health care benefits.
"The only wiggle room they're going to likely get is the same wiggle room that Chrysler announced a few months ago -- maybe a little more," said Sean McAlinden, analyst with the Ann Arbor-based Center for Automotive Research. "But if that happens, they will all three get it."
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