Retired GM workers struggle to replace health care - International Herald Tribune
Retired GM workers struggle to replace health care
By Nick Bunkley
Monday, November 10, 2008
DETROIT: General Motors is living on borrowed time, spending more than $2 billion in cash a month and lobbying the U.S. government for a bailout to keep it out of bankruptcy.
And for about 100,000 of its white-collar retirees, time is about to run out on GM's gold-plated medical benefits.
To conserve its dwindling cash reserves, GM is eliminating lifetime health care coverage for its legions of retirees at the end of this year, leaving people like Ken Hewitt to fend for themselves in deciding how to cover their doctors' bills and prescription drug costs.
"Everybody felt like they were set for life," said Hewitt, 81, who retired from the former Chevrolet Engineering Center in 1982 and lives north of Detroit. "It's been difficult, but the information they've given us has been beneficial. Still, when you get to be our age, it's tough to make any big changes like that."
GM has had little choice this year but to make deep cuts wherever it can, including benefits that were long considered sacred.
The move was announced in July as part of a package of broad cutbacks to increase the company's liquidity, including a 20 percent reduction in payroll for salaried workers and suspension of GM's annual stock dividend of $1 a share.
But even these and other measures have not been enough to stabilize the company's finances, as the auto industry suffers from a weakening economy and tight credit that makes it hard for shoppers to get loans.
On Friday, GM warned that it might run short of cash by mid-2009, and it is asking for federal help with greater urgency.
GM has estimated that eliminating white-collar retiree medical benefits, in addition to pay and staff cuts in its current white-collar work force, will save the company about $1.5 billion annually. Union contracts prevent the company from revoking coverage for former factory workers. Ford and Chrysler already have cut health coverage for salaried retirees.
In fact, paying the cost of hospital stays, surgeries and expensive drugs for retirees, a group larger than GM's active work force, is a major reason the company's financial woes are so great. GM says it spent $4.6 billion in 2007 on health care for its one million employees and retirees and their dependents.
Many retirees say they are aware of the burden these costs represent to the company, so they do not blame GM for cutting them off. Even so, they lament the demise of such a valuable perk.
"If the company goes out of business, we'll lose everything anyway," said Richard Moore, 70, who held management positions at GM plants in New York and Illinois before retiring in 1991 to suburban Phoenix. "You can't survive by giving away everything."
GM's decision to halt health care benefits for salaried retirees at age 65 means that nationwide, former engineers, plant managers and executives are anxiously trying to decipher various combinations of Medicare and other insurance plans.
For months they have been poring over stacks of brochures and sitting through sometimes-baffling sales pitches ahead of an enrollment window that opens this month and ends Dec. 31. Because GM told them that it would cover their health care for life, few studied up on Medicare and other coverage options as they approached retirement.
"Some of these people have been on GM's plan for 40 or 50 years, and now all of this is thrown at them," said Jack Dickinson, a GM retiree who runs the Web site OverTheHillCarPeople.com. "People are highly upset, confused and totally lost. The Medicare system is very hard for older people to tackle."
To help retirees pay for their new coverage, GM is raising monthly pension payments by $300, which typically means $240 or $255 after taxes.
The cost of replacement coverage varies, depending on a person's needs. Some find that they can get adequate benefits for about the same amount as their pension increase, but others must now find several hundred dollars more in their monthly budget.
"Anyone that thinks they can go out and replace insurance that you had with General Motors for $255 and get the same kind of coverage, I'd like to sell them a bridge in Wisconsin somewhere," said Dickinson, 65, whose irritation with GM's move is apparent in the headline "GM Robs Their Elderly Retirees" on his Web site atop information about the changeover.