Chrysler Announces Changes for Worker, Retiree Health Benefits, Including Plan To Tie Premiums to Pay Levels

As expected, the Chrysler Group of DaimlerChrysler on Wednesday announced a reduction in health benefits for active and retired salaried employees, the Detroit Free Press reports (Norris, Detroit Free Press, 3/16). Under the plan, Chrysler will increase monthly health insurance premiums for salaried U.S. employees, with the amount of the increase based on position and salary (Bloomberg/Los Angeles Times, 3/16). For the 4,100 lower-level professional and administrative Chrysler employees, monthly health insurance premiums will not change in 2007. Monthly health insurance premiums for the 9,400 mid-level Chrysler managers will increase by between 50% and 100%, or by $450 on average, in 2007 (Detroit Free Press, 3/16). Chrysler executive employees will have to pay the expected annual increase in health care costs of $1,500. Overall, salaried Chrysler employees in 2007 will cover an average of 31% of their health insurance costs, compared with about 27% in 2006 (Maynard, New York Times, 3/16). According to Chrysler officials, the company spent $2.2 billion on health care in 2005 and expects to spend $2.3 billion in 2006. Chrysler has begun discussions with the United Auto Workers for concessions on health benefits for union employees (Thomas, AP/Philadelphia Inquirer, 3/16).

Retiree Health Benefits
Chrysler also will increase monthly health insurance premiums for current and future retired salaried employees who are younger than age 65 based on salary level at the time of retirement and will establish health care retirement accounts for retirees older than age 65 (Detroit Free Press, 3/16). Chrysler retirees younger than 65 who had annual salaries of $50,000 or less when they retired will pay half of any future increases in health insurance premiums, and those who had higher salaries will pay a larger share. Chrysler retirees younger than 65 who had annual salaries of $171,000 or more will pay 100% of future increases in health insurance premiums (Boudette, Wall Street Journal, 3/16). For Chrysler retirees ages 65 or older, the company will contribute $1,750 annually for retirees and $1,750 annually for spouses or partners to health retirement accounts (Detroit Free Press, 3/16). Chrysler said that retirees ages 65 and older will pay about $5,100 in health insurance premiums and out-of-pocket costs in 2006 but added that the amount should decrease to about $3,150 in 2007 through the plan.

Comments
In a letter to employees, Chrysler CEO Tom LaSorda said, "We all have to do our part going forward. And we have to do it in a way that is innovative, competitive, equitable and provides a long term solution" (AP/Philadelphia Inquirer, 3/16). He added, "Our solution recognizes that while employees need to pay more for their health care, cost increases should be borne equitably based on an employee's ability to pay. The market won't allow car makers to raise prices to absorb these expenses" (Mateja, Chicago Tribune, 3/16). Chrysler spokesperson Jason Vines said, "The more you make, the more you contribute," adding, "When you are asking employees to sacrifice, everybody has to step up to the plate, and Tom LaSorda is at the front of the line" (Wall Street Journal, 3/16). Joe Phillipi, a principal with AutoTrends, said, "This program is clearly a way for Chrysler to get the UAW to share the sacrifice. No one wants to pay more, but sharing the burden makes it more palatable to UAW" (Chicago Tribune, 3/16).