Wednesday, February 08, 2006

Struggles at General Motors

Salaried retirees hit again

If health costs go up next year, former GM workers pay anything over this year's costs.

Brett Clanton / The Detroit News

DETROIT -- General Motors Corp.'s plan to cap health care spending for its salaried retirees may hit Richard Amacher harder than it does some of the automaker's other former employees.

The cost-cutting move means that Amacher, a former production engineer with multiple sclerosis, and his wife, who has lupus, are likely to pay more for prescription drugs -- already the couple's biggest household expense.

While Amacher concedes that GM's financial troubles may demand sacrifices, he said salaried retirees have already seen cuts to their health care benefits and should not have to shoulder more hikes.

"We worked our hearts out for the company," said Amacher, 57, who retired in 1999 and lives in Rochester Hills. "And this is what we got."

Health care caps for salaried retirees were one of several cost-cutting moves outlined by GM on Tuesday as part of an ongoing restructuring that is aimed at returning the world's largest automaker to profitability after an $8.6 billion loss last year.

But with the potential to affect 100,000 salaried retirees, they are among the most far-reaching turnaround measures yet offered.

The caps are meant to shield GM from rising health care costs, which have grown at double-digit rates in recent years, by locking in coverage at 2006 levels. In other words, if health care costs go up next year, retirees will pay for any amount that surpasses what GM spent for their health costs this year.

The caps come as more U.S. companies are breaking from the tradition of providing cradle-to-the-grave benefits. They also chip away a bit more at the top-shelf perks Detroit's auto employees have enjoyed for decades, which are now coming under pressure as domestic automakers struggle with rising costs, excess factory capacity and increasing foreign competition.

Following the lead of Ford Motor Co., which instituted health care caps for salaried retirees in December, GM said its caps will reduce its future retiree obligations by $4.8 billion and will shave about $900 million before taxes from its annual health care tab.

"I don't take these actions lightly, and I don't take them without considering the impact on every single person affected," GM Chairman Rick Wagoner at a press conference Tuesday morning. GM said the health care caps would take effect Jan. 1, 2007, and will target nearly all salaried retirees. Under a previously announced plan, salaried employees hired after Jan. 1, 1993, are not eligible for retiree medical benefits. Instead, GM puts 1 percent of their annual salary into a 401(k) for employees to use at their discretion upon retirement.

The automaker did not provide details about how caps would be implemented, but said program changes may include higher monthly premiums, deductibles, co-pays and prescription drug charges.

But even without details, the plan doesn't sit well with Jack Dickinson, who retired in 2001 from GM's sales management division.

"We all saw it coming, but when it hits you, it's still pretty strong," said Dickinson, who maintains a GM retiree Web site, www.overthehillcarpeople.com , from Birmingham, Ala. "It's going to be a hard pill to swallow."

GM's salaried retirees already saw health costs rise 25 percent under a revised medical plan rolled out in January, and should not be asked to give more, Dickinson said.

Yet retiree Celia Palmieri said she is willing to help GM if it helps the company regain its footing and protects the auto giant from bankruptcy.

"How on earth can you complain, when the company is in such dire straits?" said Palmieri, an executive secretary who left GM in 1987.

Last year, GM embarked on a sweeping turnaround plan aimed at shoring up its money-losing North American auto business. But some industry analysts have argued that the automaker is not moving fast enough and is not being realistic.

"Ultimately, we believe that an active downsizing of the company to a defensible market share will be necessary," said Merrill Lynch's John Murphy in a report Tuesday.

Such grim pronouncements don't give Dickinson and other retirees much hope about what's next.

"I hate to say this," he said, "but I believe it's going to get worse before it gets better."

You can reach Brett Clanton at (313) 222-2612 or bclanton@detnews.com.

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