Auto firms ignored health crisis


How health costs

fueled US Auto crisis


In light of the recent bankruptcies and restructuring of GM and Chrysler, it is useful to recall the prescient words of Uwe Reinhardt, a Princeton University health care economist, who described the Big Three “a social insurance system that sells cars to finance itself.” (NYT 7/15/03).


The absence of a single-payer system gave US auto firms a $4 per hour disadvantage relative to Canada, according to calculations by the Canadian Auto Workers.


Similarly, former General Motors CEO Rick Wagoner estimated that US health costs represented about $1,400 a vehicle. "Health care put us at a $5 billion disadvantage against Toyota," Wagoner stated. Since the profit on a small car is roughly $1,000, the US automakers have been essentially sacrificing as much as 60% of their potential profit on small cars. (In part that explains their heavy reliance on SUVs, which yielded a profit of as much as $10,000 each.)


While GM advocated single-payer health care in the early 1990′s under then-CEO Jack Smith, the automakers seemed to lose interest later in the decade as their profits soared as a result of heavy SUV sales. GM even added two pharmaceutical executives to its board of directors, thereby inserting implacable foes of health care reform on its top leadership body. Drug companies fear that single-payer health care will result in negotiated prices for pharmaceuticals, as they do in most nations.  (See Morton Mintz, "Single Payer is Good for Business, Nation, 11/15/04)


One of the most pernicious outcomes of the "bailout" agreements is that the UAW’s health care programs for retirees are now heavily reliant on GM and Chrysler stock. In the stock price drops, retiree health benefits will be on the chopping block.

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