George Will

     GM says its health care burdens, negotiated with the United Auto Workers, put it at a $5 billion disadvantage against Toyota in the United States because Japan's government, not Japanese employers, provides almost all health care in Japan. This reasoning could produce a push by much of corporate America for the federal government to assume more health care costs. This would be done in the name of ``leveling the playing field" to produce competitive ``fairness."      

     But remember: Employer-provided health insurance is employee compensation. It became important during the Second World War when there were wage controls and a shortage of workers. Because wages could not be bid up, companies competed for workers by offering the untaxed benefit of health care. If GM's $5.6 billion were given not as untaxed workers' compensation in the form of health care, but as taxable cash compensation of equal after-tax value, it would cost GM substantially more than $5.6 billion. Which means that soon -- GM's UAW contract is up in 2007 -- GM's workers may have to give back a value of at least $1,500 a year.

     However, GM will have to recognize that health care costs are not a comprehensive alibi for its woes. Its array of brands is too large and anachronistic: Will American buyers ever again regard Chevrolet, Pontiac, Buick and Cadillac as ascending rungs on a status ladder?

     GM can still develop splendid cars: today's Cadillacs may be the best American cars ever built. But every dollar GM spends on health care cannot be spent on developing cars -- hybrids, for example -- more enticing to buyers than some new offerings like the Pontiac G6 and Buick LaCrosse.

     Health care for retirees and their families -- there are 2.6 of them for every active worker -- is 69 percent of GM's health costs. GM says it has $19.8 billion in cash and normal mortality rates will reduce the ratio of retirees to active workers. Meanwhile, Rick Wagoner, GM's CEO, can only muse, ``It's strange. When I joined GM 28 years ago, I did it because I love cars and trucks. I had no idea I'd wind up working as a health-care administrator."

     Full, and pointless, disclosure: Mrs. Will is a consultant to the Japan Automobile Manufacturers Association. She drives a Cadillac.


George Will

George F. Will is a 1976 Pulitzer Prize winner whose columns are syndicated in more than 400 magazines and newspapers worldwide.
 
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