Several columnists recently addressed General Motors' and other automakers' rising health care... costs and the financial strain officials say such costs have put on the companies. Summaries appear below.
Michael Hill, Baltimore Sun: There are "many reasons" why GM -- which is expected to announce an $850 million loss in the first quarter -- "is in such trouble, but the bottom line is that it is not making enough cars that people want to buy," columnist Hill writes in the Sun. Hill notes that University of Maryland economist Peter Morici says that GM officials "like to blame the legacy of health care and pension costs" on the company's fiscal troubles, but "the Japanese who make cars in this country have to pay health care and pension costs, too." However, economic historian David Sicilia of the University of Maryland said health care costs are a major factor, saying, "GM has become essentially a giant health care provider that also makes some cars. ... That's the bind it's gotten itself into." Morici says the GM executives should take pay cuts and should enter into "some sort of compensation pact" with the union. If the company does not reverse its current course, "bankruptcy is a real option," which could "send all sorts of ripples through the economy since GM stock is in the hands of so many pension and mutual funds," Hill writes (Hill, Baltimore Sun, 4/17).

Fareed Zakaria, Newsweek: By "shifting production out of the United States" to deal with "massive health care costs," the Big Three automakers -- GM, Ford and DaimlerChrysler -- "highlight what may turn out to be the most significant threat to the competitiveness of American firms in an increasingly global economy: our out-of-control health system," according to Newsweek columnist Zakaria. He continues, "All large American companies to some degree have GM's health care problem," adding, "On health care there is no simple answer." Zakaria states that "despite the mythology, American health care ... is dominated by government funding," adding that the "big difference between our system and that of other countries is that in America the government cannot (often by law) exercise its clout as a buyer to drive down costs." He writes that the "most recent steps to change things have made the situation worse," such as the Medicare prescription drug benefit, which will only create "a fiscal black hole." President Bush's choice to focus on Social Security rather than health care "at this moment is to rearrange the deck chairs on the Titanic while the iceberg looms ever larger," Zakaria concludes (Zakaria, Newsweek, 4/18).

Allan Sloan, Washington Post: A "big reason" that GM is facing financial troubles is that "the pension and health care commitments it made to employees decades ago seemed to be a free lunch," but now such obligations "are eating GM alive," Sloan, Newsweek's Wall Street editor, writes in a Post opinion piece. He continues that while "GM's pension funds are in pretty good shape," other post-employment benefits, including health care, are "out of control." GM has to either "star[t] making money" or get "a break from the [United Auto Workers] or the federal government" to lessen its health care costs, Sloan writes, adding that otherwise "things are going to get really ugly" (Sloan, Washington Post, 4/19).

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