Other Editorials

Unkind Cuts

Joe Guy Collier
Saturday, October 28, 2006

As "Red Ink Rick" continues to refuse to listen, everyone directly or indirectly connected to GM will feel the slice of the knife. When will he listen, or be replaced? When will the blind begin to see? How much worse does it have to get?

Published: October 28. 2006 3:00AM
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SHRINKING BENEFITS: GM retirees fret over health costs
Ex-salaried workers to pay more

October 28, 2006

GM salaried retirees and former coworkers David Kujala, left, 68, of Allen Park, Harry Earlandson, center, 70, of Dearborn and B.J. McCown, right, 70, of Taylor discuss benefit cuts over breakfast Friday at the Oakwood Café in Melvindale. (HUGH GRANNUM/Detroit Free Press)

Benefit changes for GM salaried retirees

The increases vary by plan, but for a family enrolled in the Enhanced preferred provider organization plan, the highlights for 2007 are:

Monthly medical contribution: $150, up from $125 in 2006

Annual deductible: $1,000, up from $900 in 2006.

Out-of-pocket maximum (deductible plus co-pays): $3,000, same as 2006 (excludes prescription drug co-pays).

Basic life insurance: On Jan. 1, 2017, the basic life insurance coverage amount will be reduced by 50%, but to no less than $25,000 for those who retired before May 1, 2007.

Optional life insurance: Coverage no longer reduces by 10% a year starting at age 66 and no longer cancels at age 75.

Source: General Motors
General Motors Corp. salaried retirees are upset by increases they'll start paying for their health care benefits, but the Detroit automaker says it's a necessary step to keep costs down.

GM will begin holding a series of meetings next week to explain the changes. The company originally announced in February that it would cap the amount it pays for salaried retiree health care.

The added costs vary depending on the plan, but for salaried retirees in the Enhanced preferred provider organization plan, the monthly contribution for medical coverage in 2007 will be $150, a 20% increase from 2006. In 2017, basic life insurance coverage will be cut in half, although to no less than $25,000.

But what really bothers the salaried GM retirees is that the company already is warning them that their health care costs will continue to rise. GM plans to cap the money it spends for salaried retiree health care at 2006 levels, leaving the retirees to cover increases.

"We've seen increases coming for the last seven or eight years," said salaried retiree David Wright, 72, of Melvindale. "But the latest one is the coup de grâce, so to speak. They're dwindling us down to nothing."

Wright and a group of six other retirees gathered Friday at the Oakwood Café in Melvindale for their monthly breakfast, dubbed the GM Cadillac Breakfast Club. The retirees worked together at the now-defunct GM Fleetwood plant in Detroit where Cadillacs once were made.

These GM retirees said they realize the company is going through difficult times, but they said GM promised to provide certain benefits when they retired.

"I think they should live up to what they agreed to when we retired," said David Kujala, 68, a retiree from Allen Park.

In 1998, a group of retirees, which included members of this informal breakfast club, lost a long legal battle trying to prevent GM from changing their health coverage.

In a pamphlet sent to salaried retirees a few weeks ago, GM Chairman and CEO Rick Wagoner is quoted as saying that the changes are a "difficult but necessary decision."

With a $5.4- billion health care tab in 2005, GM management needed to find ways to cut costs, said spokeswoman Michelle Bunker. "It's just one of the many steps we're taking."

The cap is projected to reduce GM's retiree health-care liabilities by about $4.8 billion and cut GM's annual retiree health-care expense by about $900 million on a full-year pretax basis.

GM is trying to hold as many meetings as possible to explain the changes to retirees, Bunker said. Next week's sessions are booked, but GM is scheduling more meetings.

But retiree B.J. McCown, 70, of Taylor, said meetings wouldn't ease his concerns.

McCown said he approves overall of the job being done by Wagoner. While GM is taking a hit in the United States, it is also moving into growth markets, such as China, McCown said.

"General Motors is going to eventually start making big money again," McCown said. "They have to with the foreign companies they have. ... But is any of that going to come back into the States and to the salaried retirees?"

Contact JOE GUY COLLIER at 313-222-6512 or jcollier@freepress