In a speech to the Economic Club of Chicago, the chairman of General Motors said health care costs are wrecking the U.S. economy. Rick Wagoner said his company spends more than $1,500 in employee medical expenses for each new car it sells. Many foreign companies, meanwhile, can take advantage of much lower health care costs in their home countries, and put their savings to work building new plants in the U.S.
GM chairman collides with health care, trade Wagoner's list of car-cost contributors includes litigation, `overvalued dollar' vs. Asian currencies
While the Commerce Department in Washington was announcing that the U.S. trade deficit rose to $614 billion in 2004, General Motors Chairman Rick Wagoner on Thursday was telling members of the Economic Club of Chicago why.
He talked of escalating health-care costs, the weak Japanese yen and the need for controls over litigation abuse.
Wagoner said GM spent $5.2 billion on health care in 2004 for its 1.1 million employees, which includes more than 430,000 retirees and their dependents throughout the U.S. Health care accounts for $1,500 of the cost of each vehicle GM produces, he said.
By not having to spend $5.2 billion on health care, Wagoner said Japanese carmakers are able to spend money on bringing new products to market and building new plants in the U.S.
"Our foreign domiciled competitors have just a fraction of these costs, because they have few, if any, U.S. retirees," he said.
"And in their home countries, their governments cover a much greater portion of employee and retiree health-care costs."
Another key to the growing trade deficit, Wagoner told the luncheon audience held in conjunction with the Chicago Auto Show, is that Asian nations are subsidizing their currencies.
"The U.S. dollar is overvalued versus Asian currencies, primarily the Japanese yen, and is the reason for almost all the loss," he said.
Another problem for U.S. manufacturers is that they are put at a disadvantage with foreign companies by lawsuit abuse and litigation, Wagoner said.
"Our nation isn't structured to encourage manufacturing here as it is in Japan," said Jim Hossack, vice president with AutoPacific, Inc., a consulting firm.
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