Wrenching Changes on the Line
New York Times, editorial
June 14, 2006
The road back to prosperity will be a long and hard one for American automakers. Companies like Ford and General Motors groan under the weight of their history, manifested in the legacy costs that are a result of decades of promises to support workers and provide them with health care in their old age.
Foreign companies like Honda and Toyota have a double advantage. In the United States, their much newer manufacturing plants have hardly any retirees. Overseas, their workers can rely on national health care systems. Meanwhile, for American automakers, the costs are going only in one direction. In 1999, General Motors spent $3.6 billion to provide health benefits to 1.2 million workers, retirees and dependents. By 2005 the cost had ballooned to $5.3 billion for 1.1 million.
At the same time, vehicle production has been falling. G.M., Ford and the parts maker Delphi have all offered thousands of buyouts as part of efforts to restructure their inefficient manufacturing businesses, trimming payrolls to become more competitive. But that means fewer workers supporting armies of retirees, a demographic challenge not unlike the one facing the Social Security system.
The United Automobile Workers union has already made concessions on the superior health insurance its members receive. But slashing benefits is a short-term approach, and an insufficient answer when G.M. lost $10.6 billion in 2005.
In an ideal world, America would join the overwhelming majority of developed countries and hammer out some kind of national health care system. Failing such a sudden and unlikely onset of sanity, creative solutions are needed.
Sen. Barack Obama has proposed striking a bargain with American automakers to help them with retiree health care costs in exchange for higher fuel efficiency standards. While we have some questions about how to make such a system work, it is at least a worthy new idea — one of a very few in a field desperately in need of them.