Ford expects staff health-care costs to top $1 billion in 2020

Issue expected to be a sticking point in contract talks between UAW, U.S. automakers

Ford Motor Co. expects the cost of health insurance for its 56,000 hourly workers in the U.S. to top $1 billion (U.S.) for the first time next year, according to a person familiar with the situation, highlighting a growing expense for automakers even as car sales slow.

Those mounting health-care costs represent a potential sticking point in this year’s contract talks between the United Auto Workers and the three U.S. automakers that tried and failed four years ago to address an expanding outlay that threatens profits and jobs. At Ford, General Motors Co. and Fiat Chrysler Automobiles NV, the tab for health insurance topped $2 billion in 2015 and has only grown since.

Bargaining negotiations get underway this summer on contracts that expire in September with each of the three automakers. Some experts say divisive issues including cost-sharing for health-care benefits may lead to striking.

The UAW must balance its protection of benefits with the need to keep workers on the job at a time when GM is shuttering five North American factories and Ford is slashing shifts and cutting jobs as part of an $11-billion restructuring. Although the three automakers remain profitable, they are bracing for a slowdown that could become a recession while spending billions to prepare for a future dominated by electric and self-driving cars.

Nationwide, health expenditures are projected to grow by 5.5 per cent annually from 2018 to 2027, more than twice the rate of inflation, according to a new study by the Centers for Medicare and Medicaid Services. But unionized autoworkers enjoy some of the most generous medical coverage plans in the country and have been spared premium increases.

The UAW sees that as a hard-won benefit that helps make up for concessions to automakers in other areas. But automakers view these gold-plated worker plans as a growing burden that puts them at a disadvantage against rivals with non-unionized factories.

“We’re returning to major concession negotiations in the auto industry,” said Gary Chaison, professor emeritus of industrial relations at Clark University in Worcester, Mass. “The major manufacturers are saying: Give us a reason for why we should expand in the U.S. as opposed to China or India or somewhere else.”

In the U.S., workers with health insurance contribute an average of18 per cent of the premium for single coverage and 29 per cent of the premium for family coverage, according to a study last year by the Kaiser Family Foundation.

Health-care coverage has been sacrosanct at the UAW, which gave up wages and jobs in 2009 to help keep the automakers afloat but didn’t give back medical benefits. “The union has fought hard in the darkest of economic times to en- sure its members remain protected,” said Harley Shaiken, labour relations professor at the University of California at Berkeley.

“It’s not a rhetorical commitment. It is a substantive commitment at the bargaining table.”

The UAW must balance its protection of benefits with the need to keep workers on the job