Health Care for Hybrids
Rebuild the Auto Industry, Preserve Jobs, and Break our Dependence on Oil
Sustained high gas prices and a broken system of health care finance are hurting U.S. automakers badly. Today the industry faces profit losses in the billions of dollars, and hundreds of thousands of jobs are at risk. The recent bankruptcy at Delphi, major layoffs at the Big Three auto plants, and the downgrading of GM and Ford’s bond ratings to junk bond status have raised the specter of ongoing financial disruption and job loss across America’s heartland. Car makers are our nation’s largest manufacturing industry, and have been a leading source of industrial and economic strength for generations. At the same time, our nation’s ever increasing reliance on oil continues to make our economy more vulnerable and our people less secure.
The competitive disadvantage of U.S. automakers resulting from the absence of a national strategy on health care financing is becoming increasingly clear. GM faces legacy costs (health care plus pensions for retired workers) of $1,500 per car. Together, the Big Three automakers support roughly 800,000 retirees, compared to less than 1,000 for foreign-owned competitors in the United States. Clearly the failure to address America’s health care finance problems has become a major competitive disadvantage for our economy as a whole and has placed U.S. workers in a diminished bargaining position for wages and job security in relation to the rest of the industrialized world. Targeting retiree health costs offers a strong incentive for industry action on fuel savings investment and reduces the competitive disadvantage.
The Plan:
1. Improve the competitiveness of U.S. business: Addressing the legacy health care costs of the U.S. auto industry goes to the heart of the current crisis in profitability and helps level the playing field with U.S. competitors.
2. Reduce U.S. dependence on oil: Assistance to the auto industry must demand accountability for providing a strong public benefit in return for the public investment, by reducing U.S. reliance on oil through incentives for domestic manufacture of more fuel efficient vehicles like hybrid cars, advanced diesels, and increased use of farm-based biofuels, further making U.S. automakers more competitive for the future; and
3. Promote domestic job retention: Only a manufacturing incentive for conversion of U.S. manufacturing plants can ensure that the next generation of high performance, energy saving cars is made in this country. Consumer incentives or regulation in the absence of domestic investment are likely to drive even more rapid outsourcing of jobs.
4. Protect taxpayers, consumers, security, and the environment: A proposal to use health care relief as an incentive for breaking our reliance on oil will benefit taxpayers and workers, by preserving the domestic tax base while improving national security and protecting the global environment by reducing reliance on fossil fuels.
For more information: Hendricks, Nordhaus, Hwang, and Shipley, “Competitiveness, Accountability & Innovation: Strengthening America's Auto Industry.”
The Experts: Bracken Hendricks, Ana Unruh Cohen
To contact one of our experts please call/e-mail Sean Gibbons, director of media strategy, at 202-481-8228
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