Stop the madness

Today on ABC's This Week, George Will interviewed GM CEO Rick Wagoner.

Read the passage here. I hope that whoever negotiated this type of pension and benefits scheme for GM got their ass fired and fired hard. As for the union, the usual shortsightedness is to be expected, but seriously, this is ludicrous. When these contracts were negotiated, who in their right mind thought that these entitlements and the costs that they involve would help the overall health of the company, and the millions of well-paying jobs - you know, jobs, what unions are supposed to be in favour of - that go with that? Is it too much to ask union negotiators to think beyond the immediate bargaining session and understand the meaning of the phrase "long-term sustainability"?

Will: When you say people buy your product, they're paying a lot of money…

Wagoner: Yes.

Will: …they're paying a lot of money for a welfare state that you're running. Someone recently said you buy a Hyundai, they give you a satellite radio. You buy a General Motors car, or Ford, you're buying pensions, medical care and all the rest. That adds an enormous premium on the cost of a car.

Wagoner: That's really not true at all. Well, it adds to the cost. It doesn't add to the price. We price to the market. I think if you watch what we've been doing and what we're doing, our prices are very competitive, and the value that we offer is unprecedented.

If you look at the quality of our vehicles — really, now, top of the heap. If you look at our productivity — excellent. If you look at things like OnStar — we offer features that others don't offer. So the customer isn't paying for that. What's happened is, frankly, the shareholders pay for it, and it's hurt our earnings.

Will: You have and are supporting two and a half pensioners for every employee. You're the largest health care provider in the world. General Motors, I read, writes a prescription every 1.5 seconds for drugs for their retirees and others — 1.5 seconds, 24 hours a day, seven days a week, 365 days a year — cost approaching $6 billion a year.

Can you function indefinitely with this kind of healthcare burden?

Wagoner: No, I don't think we can. And that's really why we made the move we did last year. I think, by any reasonable measure, [it was a] historic agreement with the UAW — in which we agreed that about $15 billion of a roughly $60 billion healthcare burden with our hourly employees would be, in essence, funded directly or indirectly by active and retired employees.

So I think this issue of needing to share some of that cost is accepted, and that contract change was ratified.