Whose Legacy Are These

April 26, 2002
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It is a frightening prospect and one that surely makes business and legislative leaders sweat. Domestic automakers, all headquartered in Michigan, are facing the continued march of older workers into retirement. Demographers have been warning of this transition for decades, one common to every type of business and one likely to impact the number of new business starts as well. Autoworkers, however, have enjoyed the benefits fought for by unions, and have every expectation that those benefits — especially health care — will continue through their golden years. This gargantuan shadow is cast across balance sheets of declining sales and profits for U.S. automakers as they continue the decades-long fight against rising import sales, even as the foreign manufacturers continue to build huge new factories in the sunbelt states — without union labor and its spike on costs.

Late last month all three domestic automakers testified at hearings related to the Michigan Department of Community Health Certificate of Need legislation. Ford spends $2.5 billion each year on health care benefits, half of it in Michigan. DaimlerChrylser and Delphi Automotive held similar numbers.

Foreign competition certainly shows no sign of abating, and just last week South Korea’s Hyundai Motor Co. announced it, too, would open its new assembly plant in Alabama. (The Detroit News reported Alabama legislators had approved nearly $118 million in “incentives.”) The UAW has been famously unsuccessful in organizing among the employees of the foreign auto manufacturers. Instead, the union has made membership gains among health care workers, likely assigning new and as yet uncalculated pricing to what is undoubtably America’s No. 1 necessity over the coming decades.

It is generally believed that back room discussions anticipate the Big 3 automakers will not be able to pay for so many golden years, referred to as “legacy costs.” It is generally acknowledged that lobbyists have already said as much to state legislators whom they believe to be the beast to bear the burden of those costs, so much as they can legislate it onto the backs of Michigan taxpayers and business owners, most of which are small businesses. One can see where this will lead in the perceptions of taxpayers, and the bottom lines of businesses.

Economic analysts in Michigan also warn that the number and profits of some auto suppliers will follow that of the Big 3, but engineering, research and design firms are and will continue to be strong in the state of Michigan. The academic community has even greater urgency to bone up a student population to counter such trends (the strength of which is noted in the Focus section this week).

State leaders and those now vying to be state leaders should be held accountable for policy and planning of “legacy costs”— now.

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