If Chevrolet, Chrysler, and Ford are to survive, they will have to reach an agreement with the United Auto Workers (UAW) about providing workers and retirees with $100 billion of health insurance.
If those three auto companies are to become profitable and be able to compete with the Asian companies, they will need to cut costs by 33%. Health care costs for the Asian and European auto companies are paid for by their respective countries, so U.S. auto companies operate at a distinct disadvantage.
There are now 160,000 working UAW members, but there are 432,000 retirees. In other words, the auto companies are supporting more retirees than workers, an equation that is obviously out of whack.
One way of dealing with the problem is for the union to assume responsibility for retiree health care costs as occurred with Goodyear Tire, which provided $1-billion that went into the union pension fund and that will pay for the health care of retirees. A similar agreement was reached with Dana auto parts and the UAW. That agreement cost Dana $750 million. Both companies now have no financial responsibility for paying for retiree health care. A similar fund for retired auto workers would be significantly larger than the ones provided by Goodyear and Dana.
The U. S. auto companies and the UAW must come to an agreement before September 14, when contracts with Chevrolet, Chrysler, and Ford expire.
If they cannot come to an agreement, the future for the U. S. auto industry will be, indeed, be bleak.
