General Motors has estimated that its employee healthcare spending — $5.6 billion in 2006 — adds $1,500 to the cost of each vehicle it produces. In other words, GM's per-vehicle cost for providing healthcare is 60% of the $2,500 retail price of the Nano, an ultra-compact, four-door car produced by Tata Motors in West Bengal, India. And GM has said its tab for providing healthcare could rise to the equivalent of $2,000 per vehicle this year.
Clearly, even if GM wanted to compete in the burgeoning market for small, inexpensive vehicles targeting the growing middle class in developing countries such as India and China — something Chairman and CEO G. Richard Wagoner has said the company won't do — its healthcare cost overhead alone would make that nearly impossible.
GM isn't the only U.S.-based manufacturing company whose rising healthcare costs threaten to put it into a competitive hole.
According to a recent report by the Council on Foreign Relations, healthcare premiums in the United States have risen by 87% on average since 2000. In 2004, the report says, healthcare became the most expensive benefit that manufacturers and other employers provide.