Health Care Costs Targeted During GM Contract Talks

By: Associated Press
By: Associated Press

General Motors Corp. will try to reduce its staggering employee and retiree health care liabilities in upcoming contract talks with the United Auto Workers, according to a government regulatory filing Thursday.

GM said its obligation for post-retirement health care and other benefits was $68 billion at the end of last year and could grow on a global basis, the company said in its annual report filed with the U.S. Securities and Exchange Commission.

The Detroit-based company also said it spent $4.8 billion on health care in the U.S. last year, and that is expected to drop only slightly to $4.7 billion this year.

"We must continue to make structural changes to reduce our U.S. health care cost burden, the source of our largest competitive cost disadvantage," the company said in the filing.

GM said it needs to continue to reduce structural and material costs, and its production must become more efficient in order to return to profitability. But it said restrictions in labor agreements could limit cost savings.

"Our current collective bargaining agreement with the UAW will expire in September 2007, and we intend to pursue our cost-reduction goals vigorously in negotiating the new agreement," the company said, adding that a UAW strike or threat of a strike could affect its business and impair further cost reductions.

GM said it provides extensive pension and retiree health care benefits to more than 400,000 retirees and surviving spouses in the U.S.

In the filing, the company pointed out that the UAW agreed to retiree health care cost sharing in 2005 that reduced its post-retirement health care obligations by $17 billion, and it capped salaried retiree health care spending levels effective in January.

A UAW spokesman declined to comment on the filing.

On Wednesday, GM, the world's largest automaker, reported a 2006 fourth-quarter net profit of $950 million, but the company still lost $2 billion for the year. It also lost $10.4 billion in 2005, and is in the midst of shedding thousands of jobs and closing plants to shrink its factory capacity to be more competitive with Asian automakers, mainly Toyota Motor Corp.

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