Justice, Healthcare, and the Auto Industry

By Al Cholger
United Steelworkers, Staff Representative
December 2008

Recently, attention has been sharply focused on the Automobile Industry, and whether the financial bail-out that has been offered to the financial industry will include support for the “Big Three” GM, Chrysler and Ford. That conversation has included whether bankruptcy is pending for any, or all of the above, and what the implications of bankruptcy would be. I also think it is important to approach this from the impact on people, and not as a sterile discussion of the Company and the finances.

While I’m not a trained economist, I want to share some ideas. And  to apply those ideas, it seems fair to investigate how the industry got to the point it is, now.

Since the late 1970’s manufacturers have all but abandoned auto production, particularly sub-compact and compact cars, and focused most of their domestic business on Vans, Pick-up Trucks and more recently SUV’s. That has cost thousands of jobs in Automobile production and suppliers to that sector. At the same time there has been a growing market share captured by off-shore auto manufacturers.  So, why have the imports and transplants been able to succeed, making and selling small cars, when the domestic auto builders have not? I think the answer is linked directly to the current crisis in auto, and the key to the car problem is healthcare.

Many sources identify the costs associated with retiree, and current employee health care to add $1500.00 to the cost of every vehicle made in the US. Those are costs that imported cars don’t have to pass on to customers. I have experienced the constant rise of  healthcare costs, beginning in the late 1970’s and we should recognize that this is the same time frame that GM, Ford and Chrysler began their withdrawal from the small car market. One conclusion is that the automakers got to a point where they chose to exit the market in the US, because they couldn’t be price competitive with companies whose employees were covered under National Health services. As the Imports became stronger in the US, they expanded their market into the small truck, then the small SUV and eventually into the large truck market.  Losses in that market, coupled with the recent rampant escalation of fuel prices, and the tightening of lenders regulations, have pushed the former Big Three, now often referred to as the Detroit Three, right to the edge. Now, retiree Healthcare costs are poised to push them over the edge.  In 1962, GM had 11.5 active employees for every retiree, in 2005, GM  had 2.5 retirees for every active employee. Some of that massive change is due to dramatic productivity improvements, and much of it is due to downsizing, with less people building and selling less vehicles. In the last three years, buyouts and normal attrition have increased that ratio. GM will surprise no one, when they seek to void their contract to provide healthcare for retirees. You can count on three requests during bankruptcy hearings. First, they will request to buy out existing management (read: Golden Parachute).  Second they will request to be allowed to hire “new, highly qualified” management (Read: we really need these high cost managers) Third they will request relief from (gut) the contract benefits (read: Blame the Victim)

The question that sits like the elephant in the middle of the room is, “Why don’t the UAW , Congressional Leaders, or both, demand the bail-out begin with a commitment to Universal, Single Payer Healthcare”? That one reform would correct their cost disadvantage in the economy car market. The economy car is the car of the future, the green car, the sustainable car, the car more people could afford, the US version of the Prius. Single Payer would also correct the retiree Healthcare problem. While there would be residual issues, related to reimbursing the value of the promised benefits, the general situation would be made much better by the introduction of a healthcare safety net, which would, after all cover everyone, not just those affected in the industry. Single Payer Healthcare would be good for the Company, the Union, Retirees and all others, employed, unemployed, comfortable and poor. Everyone that is, except the Insurance industry, and their battalions of lobbyists.

Our job is to train and mobilize our own battalions.