The cradle-to-grave benefits that have long made auto jobs among the most coveted are slowly eroding as Detroit automakers and parts suppliers try to rein in soaring costs and sharpen their competitive edge.
Monthly premiums, co-payments and deductibles for medical coverage are rising. Matches to 401(k) contributions are being slashed. New white-collar workers at Ford and Chrysler no longer get traditional pensions. And some suppliers are cutting retiree health care coverage.
Detroit's auto industry has been slow to join corporate America's decades-long drift away from lifetime company-paid benefits, mainly because of union pressure.
But as lower-cost foreign rivals claim a growing chunk of the U.S. auto market, Detroit's Big Three and the parts makers that supply them can no longer afford their role as benefactors.
Thousands of workers in Michigan and elsewhere are being forced to help pay for, or give up entirely, the Cadillac benefits they expected to rely on as wage-earners and retirees.
"My first reaction is to go buy a Toyota, but I don't know if I could do that," said Dean Woodard, 58, a retired engineering manager at Delphi Corp., who learned last month that his health care coverage through Delphi will eventually be eliminated. "I feel like they've turned their back on me a little bit."
The annual health care tab for the Big Three is about $10 billion and climbing. Retiree pension obligations can add another $2 billion or more.
While small benefit reductions may help ease the financial burden, experts say deeper cuts will be needed to narrow the competitive gap with Asian rivals, which have far lower health care and pension expenses, in part because they have fewer retirees.
UAW resists deeper cuts
Shifting costs to workers will likely continue, especially when it comes to dealing with skyrocketing health care expenses.
Employer-sponsored insurance premiums increased an average of 11.2 percent in 2004 -- the fourth straight year of double-digit growth, a Kaiser Family Foundation survey found.
Some of the expense already is being carried by salaried workers through premiums, co-pays and deductibles.
The United Auto Workers union has also granted some concessions, but resists deeper cuts and has not agreed to monthly health care premiums.
"We believe it is increasingly clear that America's health care cost crisis cannot be resolved at the collective bargaining table," UAW President Ron Gettelfinger said in a statement last month.
Walter McManus, director of the University of Michigan's Office for the Study of Automotive Transportation, said the UAW should have started paying into health care long ago.
"They've kind of established this pattern that the hourly workers get incredible benefits compared to the salaried and compared to other industries," he said. "The industry is not productive enough to warrant those benefits."
Automakers are making it clear that they need more union help shouldering costs.
At the New York auto show last month, Gary Cowger, General Motors Corp.'s top labor executive, called for "an across the board health care plan for salaried and hourly employees" to reduce the automaker's annual health care tab, which will surpass $5 billion this year.
DaimlerChrysler AG's Chrysler Group and the UAW recently agreed to institute deductibles for the first time for some workers and retirees enrolled in a preferred provider organization.
Still, John Franciosi, Chrysler's chief UAW negotiator, said the automaker's approach with the union "probably needs to be relooked at and probably needs to have some greater urgency."
Bruce Vladeck, a health sciences expert at Ernst & Young in New York, said business and government must jointly address structural problems that are driving up health care costs. Raising co-pays and deductibles and charging premiums are just Band-Aid measures, he said.
"These buy you a few years," he said. "They don't solve the problem."
Along with shifting more health care costs to active workers, automakers and suppliers are cutting health care for retirees and rethinking pension plans.
Beginning in 2007, Delphi will stop paying health insurance for 4,000 retired salaried workers and thousands more future retirees in a move that will ultimately save the firm $500 million.
Last April, Troy supplier ArvinMeritor Inc. said it will eliminate supplemental health coverage for retirees over age 65 by 2006 and cut retiree coverage altogether by 2023.
U.S. businesses have slowly been reducing retiree health care coverage for 30 years -- only about 13 percent still offer some coverage, said Dallas Salisbury, president of the Employee Benefit Research Institute in Washington.
GM overhauled health care coverage for new salaried hires in 1993 and dropped traditional pensions for new white-collar workers in 2001 in favor of savings accounts.
A new plan at Chrysler for salaried workers hired after Jan. 1, 2004, replaces pensions with employee-managed retirement accounts and traditional health care coverage with medical savings accounts. Every year, Chrysler will deposit 1 percent of workers' annual pay into the medical accounts.
New Chrysler hire Mignon Stephens likes the idea of managing her own money in retirement, but she is less sure about being responsible for her health coverage. "I'm just wondering how that's going to work out."
At Ford Motor Co., white-collar employees hired after Jan. 1, 2004, get the same retiree health care benefits as veteran workers, but no pension. Ford will make monthly contributions to a retirement savings account, equal to about 4 percent of a worker's salary a year.
Chrysler and Ford set up the retirement programs to help recruit younger employees, who are likely to switch careers several times and want retirement money to be portable.
"We need to plan for the new work force," said Jim Bante, Chrysler's senior manager of retirement and savings.
Most recently, GM canceled merit pay increases this year and cut the company match to employee 401(k) accounts from 50 cents on the dollar to 20 cents.
The moves came in response to "business conditions" and the "competitive environment," said GM spokesman Robert Herta. "These were difficult decisions."
Changes frustrate some
The changes can be difficult for employees and retirees as well. GM's switch last year to Cole Managed Vision for eye care has frustrated some.
"Folks don't think we're getting the quality care we got before," said Jack Dickinson, who runs
www.overthehillcarpeople.com , a Web site for GM retirees.
Retired vehicle designer Jack Bucchare, 70, of Shelby Township now waits up to six weeks for reimbursement if he uses his longtime provider outside the Cole network.
"This puts a little crimp because we're all on a fixed income," he said. "The joke is if this continues we'll be going to a hardware store for our glasses."
Detroit News Staff Writer Ed Garsten contributed to this report. You can reach Brett Clanton at (313) 222-2612 or bclanton@detnews.com.
Latest Autos Insider reports 
In Autos
Previous Story
