One of the most important and challenging issues facing employers in the United States today is the cost of health care. Remembering what you read in the article about GM, reflect on the following observation from the National Review in November, 2005:
Delphi may be the world's largest maker of car parts, but that's just a hobby. Its balance sheet looks more like that of a pension fund and a health-insurance provider. Delphi's unions have negotiated such generous benefits for their aged that a worker who makes $25 an hour costs the company $65 an hour once he retires. Delphi's pension obligations alone are estimated at $8.5 billion, roughly $4.3 billion of which is unfunded. It is not surprising that this cost structure has driven Delphi into Chapter 11 bankruptcy, and it will not be surprising if others follow: GM is thought to have unfunded pension obligations totaling some $31 billion. There are several lessons here. The first is that unions gain nothing in the long run by extracting promises their employers cannot keep. Second, defined benefit pension plans-in which companies pay a guaranteed sum to retirees-are less likely to remain solvent than defined-contribution plans-such as 401(k)s-whose payouts depend upon market performance. Finally, the Delphi debacle should call to mind the granddaddy of underfunded defined-benefit plans: Social Security is Delphi writ large, and if we do not reform it, we should expect it to meet a similar fate (National Review, p. 6).
Imagine you are sitting at the bargaining table representing GM. You are collaborating with union representatives to develop a health insurance strategy for the next three years.
The assignment is as follow
(1) Selects three important health care issues to negotiate for the GM labor contract.
(2) Describes why these issues will be important over the next 3 years.
(3) Describes why these issues will be important for GM and union representatives to agree upon.