Ford exec gets new task: Solve health care crisis
BY TOM WALSH
DETROIT FREE PRESS COLUMNIST
Ford Motor Co. Chief Executive Officer Bill Ford is so alarmed soaring hospital and doctor bills are destroying U.S. jobs that he has assigned one of his top executives, Vice Chairman Allan Gilmour, to craft a proposal for fixing the nation’s health care system. Ford and Gilmour would then take the idea to other companies, unions and ultimately, to public officials in Washington, D.C.
The automaker spends about $1,200 on employee and retiree health care for every vehicle it builds, a huge cost that private employers don’t bear in countries with government-funded medical care.
The health care issue “is driving investment decisions away from the U.S., and that’s wrong,” Ford told reporters Tuesday. Ford Motor, General Motors Corp. and other major U.S. industrial firms have provided generous health care benefits to hourly and salaried workers for decades. But the skyrocketing cost of those benefits — which has increased more than 10 percent annually in recent years — has saddled these firms with a competitive gap that Ford said is “so compelling that it’s very tough to offset when you want to make an investment decision” about where to build a plant and create jobs.
“I just think that as a country, if we have a model that isn’t working and a model that’s driving jobs overseas, then we’d better take another look at it,” Ford said.
Ford has spoken out before about the dangers of surging health care costs; he called the problem “intractable” in a May 30 speech at the Detroit Regional Chamber’s leadership conference on Mackinac Island. But he’s upping the ante by putting Gilmour on the case and planning to enlist other allies.
Gilmour, 69, was a highly respected longtime Ford Motor executive whom Bill Ford plucked out of retirement in May 2002 to repair the company’s financial house. During his retirement, Gilmour was chairman of the Henry Ford Health System’s board of directors in Detroit from 1996 to 2002.
Nancy Schlichting, CEO of Henry Ford Health, said Gilmour’s steady hand and sense of humor helped the hospital system navigate through a period of severe cost-cutting in which about 2,000 jobs were eliminated.
“I’ve asked Allan to head up a major health care initiative for us and involve, when the time is right, others in the industry,” Ford said. “He’s uniquely positioned to do that because he knows the issue very well. . . . He’s seen it from both sides. Plus, he’s got great external credibility, so when it’s time for him to interact in Washington, Allan will do so with authority.”
Rick Wagoner, GM’s chairman and CEO, has also decried the corrosive effect of health care costs for U.S. companies, and a GM spokesman said the company would probably be willing to discuss ideas that Ford and Gilmour might advance.
In a recent interview with Fortune magazine, Wagoner said, “We are trying to make a point in Washington that if we’re concerned about job growth in a competitive economy, it’s important to understand that health care costs are a significant competitive disadvantage” for the United States.
Ford said he has no preconceived notion of how to solve the health care crisis.
“I don’t want anyone to say Bill Ford’s out raising the banner for national health care,” he said. “But I do think we need a new model, because if the employers are getting choked with health care, and the hospitals are all losing money and the HMOs claim they’re not making any money, then the system does not seem to be working very well.
“I just think we need a dialogue on it in a national forum that we haven’t had yet. That’s why I hope Allan will be able to help us craft a position.” He said he hasn’t given Gilmour a deadline or timetable.
Despite the rising health care costs, Ford said his troops have done some herculean cost-cutting this year — about $3 billion in all areas of the company. As a result, Ford said the automaker will post a profit of about $1.8 billion this year, despite flat sales. He also said he expects 2004 “to be a better year than we had in ’03.” He said Ford Motor has beaten Wall Street profit estimates for seven straight quarters, and with cash reserves in excess of $27 billion, “We have the financial flexibility to do whatever we choose.”
Ford said he is “comfortable” with current employment levels. “I don’t anticipate anything new” in terms of head count next year, he said. Ford Motor has cut about 10,000 hourly jobs since 1996 and reduced salaried head count by a similar number during the past three years.
Cost-cutting will continue, however, and include the sourcing of more parts from China. Ford said the company will buy about $1 billion in parts from China next year. The U.S. economy, he said, is “clearly getting stronger. One of the fears I have, though, is whether it will be a full-employment recovery. We do have a lot of manufacturing jobs that are going overseas.”
Ford Motor has been billing 2004 as the “year of the car,” signaling a new emphasis on passenger cars after years of expanding its truck offerings. Most of its near-term new-car designs will be midsize and larger, but Ford said Tuesday that the firm is also exploring a minicar for the U.S. market.
The “Focus has been a very good entry-level vehicle for us, but there is a question, ‘Do we need to do something below Focus?’ ” he said. “And we’re taking a look at that. “We’re fairly far along,” he said. “But we would only do it if we could do it profitably.”
Copyright Ā© 2003 Detroit Free Press Inc.
