Car makers in talks to end healthcare costs

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The Independent Online

America's biggest motor manufacturers are negotiating a revolutionary plan to rid themselves of tens of billions of dollars of healthcare liabilities by transferring the responsibility to employees' unions.

General Motors and Ford have opened talks with the United Auto Workers (UAW) union about a scheme that would see the union run a massive fund to pay the healthcare bills for tens of thousands of retired car plant employees. In return for a one-off payment into the new UAW fund, the car makers could, with one bound, be free of liabilities they say are crippling them.

The proposed scheme would be modelled on a deal that ended a strike last month at Goodyear, the tyre producer, when the United Steelworkers took over $1.2bn (£606m) of healthcare liabilities.

The talks are at a preliminary stage and there remains the question of where the loss- making companies might get the cash to set up the fund. GM alone is estimated to have $55bn in future liabilities.

GM complains that paying healthcare costs for retired workers adds $1,500 to the cost of every car it produces. Future liabilities have also risen to such an extent that GM and Ford debt is rated as "junk", adding to their finance costs.

There is increasing nervousness on Wall Street over a new round of pay negotiations between the big three - GM, Ford and Chrysler - and unions, which are due to start in the autumn. Protecting healthcare benefits has shot to the top of the UAW's agenda, but GM is hoping to win at least $2bn of concessions from the union in this area.

Talks on a transfer of healthcare liabilities to the UAW shows a willingness on both sides to consider radical solutions to the crisis gripping the American car industry, which is to shed more than 70,000 jobs this year.