United Auto Workers President Ronald A. Gettelfinger said yesterday that General Motors has not made the case that health care concessions by the union are vital to making the company profitable.
"We don't know how big of an issue it is at GM until we study it," Gettelfinger said in an interview. He reiterated that the union would not reopen its contract, due to expire in 2007, but would try to find ways to cut costs within the confines of the contract.
Gettelfinger said the union is scouring health care costs for ways to reduce waste and improve efficiency, and views reducing benefits or increasing workers' share of health care costs as a last resort. Concessions offered as temporary measures tend to become permanent.
"If we make a move anywhere, that means it's gone," he said. "Then they turn around and they make a profit the next quarter."
He argued that as long as the company has about $20 billion in cash reserves, such concessions are not warranted. In addition, health care cuts by union members might not make much difference on the company's books, he said. Although health care costs account for about $1,500 per vehicle made, labor costs total only 15 to 20 percent of the cost of a car, he said. Other costs, including the incentives GM is offering buyers to retain its market share, are far higher than the cost of health care, he said.
After a $1.1 billion loss in the first quarter of this year, GM President G. Richard Wagoner Jr. announced at the company's annual meeting this spring that health care costs had to be significantly lowered to help pull the company out of a dismal year and questionable future. The company pays $5.6 billion in health insurance costs for 1.1 million workers, retirees and family members.
Hourly workers at GM have no deductibles and pay no monthly premiums, but do have nominal co-payment charges. Salaried workers pay slightly more. Hourly workers pay about 7 percent of their health care costs, while the national average is about 34 percent. Salaried workers at GM pay about 27 percent.
Gettelfinger's comments come after speculation that GM would force a decision by the end of June and might cut health care without union consent. Gettelfinger said any sort of unilateral action by the company would be illegal. "For them to make a unilateral change would mean breaking the contract. I don't think GM wants to break its contract," he said.
Many labor watchers say the back-and-forth between the union and GM is nothing more than saber rattling.
"I think that there's a tremendous amount of posturing going on, particularly on the part of GM," said Gary N. Chaison, professor of industrial relations at Clark University in Worcester, Mass. "But I think at the last moment, parties are going to pull back."
That does not mean the health care issue is a small one. "It's an explosive issue, and it has been for the last 10 to 20 years in collective bargaining," Chaison said. "It's a difficult issue to deal with, because it's such an emotional issue. It's the type of benefit you need."
The union has actuaries and financial advisers working with its own experts to find other ways to cut health care costs, according to Gettelfinger. He would not speculate on when any decision might be made. "We don't have a deadline," he said. But, "we're not dragging our feet."
"We are in discussions, by all means, and we continue to be in discussions even during our two-week break here," said Stefan Weinmann, a GM spokesman. The company closes its offices and plants, and the UAW also closes its offices, during the first two weeks of July.
In June, in an effort to boost sales, the company offered an unprecedented incentive for consumers to buy most GM 2005 models at employee price. The company announced last week it would extend the program for another month. Sales during June surged 41 percent.
GM's market share in the United States grew in June to 32.1 percent, the highest level since December 2002, according to Edmunds.com.
Gettelfinger said he believes the company will be profitable again as early as the fourth quarter. "Is it fair to take one or two or even three quarters and, all of a sudden, expect people to give up forever something they had and something that they were entitled to?"