[rholland]

How does the American Tax payer feel about picking up the retirement and health care cost for retired GM workers.

General Motors legacy costs
By Lou Ann Hammond

"What is good for General Motors is good for America - Chairman and CEO, Charlie Wilson, 1955.
Today this could be,
What is true for General Motors is true for America.

Are companies obligated to take care of ex-employees till they die? If there is no job guarantee, why should your life be guaranteed? What does a company do when they have negotiated unsustainable obligations?

A couple of weeks ago Pulitzer prize automotive writer Dan Neil wrote a column blasting Bob Lutz and Rick Wagoner, saying, basically, that the Pontiac G6 was another reason General Motors was going to go to metal heaven and that the top guy should go with it. I will give Mr. Neil that General Motors isn’t hitting the mark on some of their cars, especially when they are compared by price in their competitive segment.

Every car company has product cycle problems and many have ridden them out. General Motors has a problem that eats away at their profit like no other company, it is their legacy costs. These problems have been gathering steam since 1950 when negotiations for pension and healthcare started, long before Bob Lutz or Rick Wagoner were in power.

General Motors marketshare is going down and has been for some time. Ford has the same problems. With every new car manufacturer coming into America, including China soon, their marketshare may continue to go down. According to Stefan Weinman spokesman for General Motors, General Motors spends $5.2 billion on health care for 1.1 million people, equaling $4,727 annually per person. People can buy cheaper cars and get the same value without the health care costs of $1,525 built into every vehicle made. Add another $675 per car for pension costs. Other car companies may have these problems, but not for some time. BMW, Nissan, Toyota and Mercedes all build cars here in the United States with American employees, but those employees are new and very few have retired.

General Motors is the world’s largest automaker, selling nearly 9 million cars and trucks worldwide last year. It is the third-largest business in the United States, with revenue of $193 billion last year. Despite the incentives that kept sales high during America’s economic slowdown, General Motors is losing marketshare and people are saying it is because their cars are no good. They are saying that the Big Three will have troubles because of the economic and production gaps between the non-union assembly lines set up South of the Mason Dixon line, save for a couple of plants, by Japanese and European competitors. They are saying that General Motors is too concerned about their big cars and not as concerned about smaller more fuel efficient vehicles. They are saying that there are too many cars in general and that General Motors could get rid of a couple of lines.

General Motors oldest retiree will be 110 years old this year. The employee worked for GM for 32 years and has been collecting pension and health benefits for 47 years. If this employee dies and leaves behind a spouse, the spouse will get a partial part of his benefits.

General Motors reported its worst financial quarter in 13 years on Tuesday, posting a net loss of $1.10 billion, or $1.95 per share. In the first quarter of 2004, GM earned a profit of $1.2 billion, or $2.12 per share. According to General Motors it needs to be a 28-29 percent marketshare company to survive. They claim that 98 percent of their costs are fixed costs. The 1.2 billion profit was made from selling product helped along by incentives. If that 5.2 billion health care cost weren’t there General Motors would report a gain for the year.