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More Good News from the Big Three

posted by John Pottow

More good news from the Midwest - GM has announced its plans to "reform" its retiree health benefits to help its financial crisis.  (Here's an article from today in the Detroit Free Press.)  What's the plan?  Make the workers pay higher percentage of the health insurance premium?  Well, sort of.  How high -- 20%? 50%?  Hmm, try 100%.  Yup, they're canning health insurance altogether for retirees.  (In fact, it's actually worse than 100%, because that would be 100% of a group-priced health insurance policy -- presumably now the retirees will scrounge for medigap insurance in the healthcare state of nature spot market.)  As a bone, GM's going to increase the defined-benefit pension payment by up to $300/month.  Sounds like yet another shuffle from defined-benefit to defined-contribution, writ large.

I'm not picking on GM.  Economic life sucks here (although Google opened a facility in Ann Arbor -- so let's keep those hopes for the new Michigan economy alive).  I'm just sharing the news...

Comments

I just can't understand why all the other industrialized countries don't adopt our free market health care system.

I mean, they're settling for socialized medicine. And that CAN'T be better than our HMOs, job dependent coverage, and double-the-cost system. Right?

I've always been mystified how an employer can change the terms of a retirement plan after the employee has retired. The employer and the employee struck a bargain initially, and then the employer gets to reprice the bargain after the fact, according to its convenience and whim. I know ERISA doesn't bar this, and presumably the employee's contract reserved the employer's right to change the terms of the plan, but that strikes me then as an illusory contract--the agreement otherwise boils down to "I'll work for you in exchange for you paying me whatever you feel like." That's not a contract, and even if the original terms (without changes) were a contract, then the pre-existing duty rule should prevent such an after-the-fact change. It looks to me like an illusory contract, for which the employees should get quantam meruit, which is probably the original terms of the retirement plan. Also, fwiw, it is eerily analogous to credit card issuer's any time/any reason change of terms, retroactively applied. How did the acceptability of this sort of term slip into contract law?

I've always been mystified how any person assumes they have a "right" to benefits long after the value they added is gone. When (not if) GM declares bankruptcy, all contracts will be rewritten, especially their health care liabilities. I'll laugh at the self-indulgent UAW because their demands killed the company.

Honda and Toyota will never have unions because unions don't offer workers anything that Honda and Toyota don't already give. Honda and Toyota do, however, expect their workers to adopt lean and other forms of continuous improvement that the UAW does not permit GM to implement. Not surprisingly, GM and Ford are far behind the quality and price of foreign automakers.

Earth to GM and the UAW: Americans want a long-lasting product, nothing else matters. Lean is the only way to go. The reason Ford/GM cost more than foreign cars is simple - Ford and GM must add in labor inefficiencies and healthcare legacy costs.. Honda and Toyota don't.

GM only has a chance of surviving as a company if they declare bankruptcy tomorrow.. but, naturally, they won't.. so they'll burn through their piddling amount of cash, declare bankruptcy, and never come out. Hope the constant antagonism was worth the job loss, UAW!

GM also doesn't make cars that people want to buy. Fuel-efficient rice burners started selling big in the 70's, and now hybrids are selling like hotcakes, and they still don't get the message. The unions had nothing to do with their lousy design and marketing decisions.

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