General Motor's $1.1B Loss, 'Legacy Costs', Los Angeles Times Examines

Main Category: Public Health
Article Date: 26 Apr 2005 - 9:00 PDT

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The Los Angeles Times on Sunday examined the difficulties facing General Motors, which recently reported a $1.1 billion... loss for the first quarter in part because of the increased cost of providing health care coverage for 1.1 million employees, retirees and their dependents. According to the Times, GM has "ample financial reserves" to fund this year's health care costs but must find a way to address so-called "legacy costs" -- $60 billion in retiree health benefits and $87 billion in pension obligations. Closing plants and laying off workers "wouldn't ease the company's benefit burden," according to the Times. The Times reports that "some financial analysts are even willing to talk about Chapter 11 bankruptcy as a radical move to buttress GM's eroding finances." GM CEO Rick Wagoner "believes the company can manage its way out of trouble," but many executives at the company "have failed to stem a steady decline in market share" in the past, the Times reports. According to the Times, analysts say that "GM needs a considerable amount of outside help" -- including concessions from the United Auto Workers -- "to make a dent in its liabilities." The company would save more than $900 million annually if its hourly employees paid for the same share of health care costs as the company's 40,000 salaried workers, according to GM CFO John Devine (O'Dell, Los Angeles Times, 4/24).

The Los Angeles Times

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