DETROIT — General Motors is living on borrowed time, spending more than $2 billion in cash a month and lobbying for a government bailout to keep it out of bankruptcy.
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And for about 100,000 of its white-collar retirees, time is about to run out on G.M.’s gold-plated medical benefits.
To conserve its dwindling cash reserves, G.M. is eliminating lifetime health care coverage for its legions of retirees at the end of this year, leaving people like Ken Hewitt to fend for themselves in deciding how to cover their doctor’s bills and prescription drug costs.
“Everybody felt like they were set for life,” said Mr. Hewitt, 81, who retired from the former Chevrolet Engineering Center in 1982 and lives north of Detroit. “It’s been difficult, but the information they’ve given us has been beneficial. Still, when you get to be our age, it’s tough to make any big changes like that.”
G.M. has had little choice this year but to make deep cuts wherever it can, including benefits that were long considered sacred.
The move was announced in July as part of a package of broad cutbacks to increase the company’s liquidity, including a 20 percent reduction in payroll for salaried workers and suspension of G.M.’s annual stock dividend of $1 a share.
But even these and other measures have not been enough to stabilize the company’s finances, as the auto industry suffers from a weakening economy and tight credit that makes it hard for shoppers to get loans.
On Friday, G.M. warned that it might run short of cash by mid-2009, and it is asking for federal help with greater urgency.
G.M. has estimated that eliminating the white-collar retiree medical benefits, in addition to pay and staffing cuts in its current white-collar work force, will save the company about $1.5 billion annually. Union contracts prevent the company from revoking coverage for former factory workers. Ford and Chrysler already have cut health coverage for salaried retirees.
In fact, paying the cost of hospital stays, surgeries and expensive drugs for retirees, a group now larger than G.M.’s active work force, is a major reason the company’s financial woes are so great. G.M. says it spent $4.6 billion in 2007 on health care for its one million employees and retirees and their dependents.
Many retirees say they are aware of the burden these costs represent to the company, so they do not blame G.M. for cutting them off. Even so, they lament the demise of such a valuable perk.
“If the company goes out of business, we’ll lose everything anyway,” said Richard J. Moore, 70, who held management positions at G.M. plants in New York and Illinois before retiring in 1991 to suburban Phoenix. “You can’t survive by giving away everything.”
G.M.’s decision to halt health care benefits for salaried retirees at age 65 means that nationwide, former engineers, plant managers and executives are anxiously trying to decipher various combinations of Medicare and other insurance plans.
For months they have been poring over stacks of brochures and sitting through sometimes-baffling sales pitches ahead of an enrollment window that opens this month and ends Dec. 31. Because G.M. told them it would cover their health care for life, few studied up on Medicare and other coverage options as they approached retirement.
“Some of these people have been on G.M.’s plan for 40 or 50 years, and now all of this is thrown at them,” said Jack Dickinson, a G.M. retiree who runs the Web site OverTheHillCarPeople.com. “People are highly upset, confused and totally lost. The Medicare system is very hard for older people to tackle.”
Eliminating that confusion has been a major undertaking. G.M. scheduled 150 informational meetings in cities where its retirees are concentrated and hired a company called Extend Health to answer questions and help with Medicare enrollment. A company in Tennessee, My Part D USA, which provides personalized comparisons of different plans, has met with groups of G.M. retirees and is working with OverTheHillCarPeople.com to ease the transition.
“These people have never had to deal with Medicare at all,” said Karyn Blake of My Part D USA, a Detroit-area native whose uncles owned Cadillac and Oldsmobile dealerships. “They’re hearing different things from different salespeople, and they’re totally overwhelmed. I think they kind of feel abandoned.”
Many G.M. retirees have simply turned to one another for help, by getting together with former co-workers who live down the street, sharing information on Internet message boards, or discussing the issue at meetings of the numerous G.M. retiree clubs in Michigan, Florida and other states.
“It’s nothing that we ever had to think about before,” Barbara Spencer, 77, who worked in payroll for Buick and retired in 1988. On Thursday, she attended a meeting of the Buick retirees club to discuss health care options. “You don’t want to make a mistake,” she added.
To help retirees pay for their new coverage, G.M. is raising monthly pension payments by $300, which typically means $240 or $255 after taxes.
“Anyone that thinks they can go out and replace insurance that you had with General Motors for $255 and get the same kind of coverage, I’d like to sell them a bridge in Wisconsin somewhere,” said Mr. Dickinson, 65, whose irritation with G.M.’s move is apparent in the headline “G.M. Robs Their Elderly Retirees” on his Web site atop information about the changeover.
In recent months, he said, the number of visitors to the site has doubled and its membership — for a one-time $25 fee — has grown rapidly, keeping him and a small team of volunteers busy for many hours each day.
Mr. Dickinson said G.M., regardless of its financial woes, was ignoring the steadfast loyalty that its retirees showed to the company by exclusively buying its vehicles and toiling there for decades.
“Many of these people had other jobs offered to them,” he said. “In 34 years with General Motors, I had many opportunities to go in other directions that were much more lucrative, but the promise of health care and pension for life was something that I had to consider.”
None, though, can look at the uncertainty confronting those who work for G.M., Ford and Chrysler today — along with the thousands whose jobs were eliminated — and feel they are the only ones being squeezed.
“I just hope they can recover and come back,” said Kenneth Shear Jr., 70, a former plant supervisor who retired in 1992 and now lives in Summerfield, Fla., in a community with a handful of other G.M. retirees. Mr. Shear was billed $52 to get a pacemaker several years ago, a $148,000 procedure, and never had to pay a health care bill in 31 years at G.M.
“I used to tell some of the guys that worked for me that this job is not going to be available to your kids,” he said. “I’m glad I had my career when I did.”