Up to now, union members paid 7 percent of healthcare costs. Salaried GM employees are now paying 27 percent of their healthcare costs. GM hopes to save $1 billion from its annual $6 billion cash outlay for healthcare. CEO Rick Wagoner said: ''Health costs in this country are out of control. This will significantly improve our overall cost competitiveness, as is sorely needed and will be critical to getting GM North America back to profitability as soon as possible."
There is a reason unrelated to healthcare that GM will continue to have problems with competitiveness, namely, stupidity. As the world's largest automaker trumpeted this agreement, it also announced that it will offer $500 of free gasoline to purchasers of 2005 or 2006 sport utility vehicles. This incentive comes at time when $3-a-gallon gasoline has caused sales of small cars to shoot up 23 percent in September.