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U.S. Firms Losing Health Care Battle, GM Chairman Says

By Ceci Connolly
Washington Post Staff Writer
Friday, February 11, 2005; Page E01

American manufacturers are losing their ability to compete in the global marketplace in large measure because of the crushing burden of health care costs, General Motors Corp. chairman and chief executive G. Richard Wagoner Jr. said yesterday as he called on corporate and government leaders to find "some serious medicine" for the nation's ailing health system.

In a speech at the Economic Club of Chicago, the auto executive, who is responsible for providing health insurance for more people than any other private employer in the nation, graphically detailed how rising medical bills are eating into his company's bottom line and ultimately threatening the viability of most U.S. firms.

_____Wagoner Remarks_____
Full Text: The remarks by GM CEO G. Richard Wagoner Jr. to the Economic Club of Chicago, as prepared (PDF)
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"Failing to address the health care crisis would be the worst kind of procrastination," Wagoner said, "the kind that places our children and our grandchildren at risk and threatens the health and global competitiveness of our nation's economy."

After spending several years on the health policy sidelines, Wagoner is launching a mini media blitz, hoping the competitiveness argument will be the one that finally prompts lawmakers to take on an increasingly expensive system rife with inefficiencies and inequities. Wagoner said he intends to press his case personally in Washington and with the nation's governors.


Though self-interest may be at the heart of Wagoner's crusade, he and a range of corporate leaders and policy analysts warned that GM's woes are a harbinger of what lies ahead.

"GM is the canary in the coal mine for Medicare and everyone else," said Sean P. McAlinden, chief economist at the nonprofit Center for Automotive Research. "There are many, many more companies out there in trouble because of health care costs than just the auto, steel and airline industries."

McAlinden, a labor expert sympathetic to union views, said many in Washington have mistakenly concluded that GM and other carmakers are simply whining about costly union contracts.

"GM and the United Auto Workers didn't cause this double-digit inflation in health care," he said. And if GM pushed for sharp reductions in health benefits, the powerful union would likely strike and send the company into Chapter 11 bankruptcy protection, he predicted.

Last year the automaker, known for its innovative approach to health care, spent $5.2 billion to cover 1.1 million retirees, employees and their families. Prescription drugs cost GM $1.9 billion, and the company projects overall medical spending will increase by $400 million this year. That could be offset by a provision in the Medicare drug benefit to pick up a portion of firms' retiree drug costs.

But the figure that prompted Wagoner to raise his voice is $1,500. That is the amount of money added to the price of every single vehicle to cover health care, a cost that his foreign competitors do not bear.


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