Team Auto Never Talked to Team Healthcare Reform

In Steven Rattner’s book, he describes newly elected Barack Obama asking his advisors “Why can’t [the US automakers] make a Corolla?” Implicitly, of course, he was asking “why can’t they make a Corolla in the United States.” His economic advisors, according to Rattner, admitted they didn’t know: “We wish we knew.”

The correct answer to the question would point to a number of things. Executive stupidity would be one important cause. Legacy costs would be another. Market structure and profitability requirements would be another. Weak branding would be another. You could even–pointing to the Ford Focus–argue that one of “them” can make a Corolla, or something reasonably competitive.

But one of the factors that partially explains why American manufacturers can’t make a Corolla would be healthcare costs. (With Toyota’s move of the Corolla-based Matrix production to Canada, you could even argue that Toyota can’t make a Corolla anymore, not here, anyway, even putting aside the quality problems the Corolla has had of late.)

Now, back on the campaign trail, Obama admitted that healthcare is one of the things that makes our companies less competitive. And in his big address to Congress on healthcare on September 9, 2009, Obama even singled out the auto industry as one which our exorbitant healthcare costs made less competitive internationally.

Then there’s the problem of rising costs. We spend one-and-a-half times more per person on health care than any other country, but we aren’t any healthier for it. This is one of the reasons that insurance premiums have gone up three times faster than wages. It’s why so many employers – especially small businesses – are forcing their employees to pay more for insurance, or are dropping their coverage entirely.

It’s why so many aspiring entrepreneurs cannot afford to open a business in the first place, and why American businesses that compete internationally – like our automakers – are at a huge disadvantage.

Which is why I was surprised to see no discussion about healthcare (as opposed to VEBA, the fund the UAW now uses to pay for retiree healthcare) in Rattner’s entire book.

None.

It seemed odd to me that, at a time when our country was rethinking our healthcare system, and at a time when the government was spending a boatload of money to try to make our auto companies competitive again, the teams pursuing those initiatives wouldn’t at least touch base, to test whether healthcare even addressed the problems that contributed to the automakers difficulties.

So I asked Rattner during the book salon.

emptywheel: Aside from a technical discussion of VEBA (for those not familiar, that’s the fund that the Big 2.5 negotiated with the UAW, which the UAW now uses to pay health benefits for retirees, which was a critical issue during negotiations), there was virtually no discussion of health care costs and the way that contributes to profitability (or lack thereof) for car companies that manufacture in the US, as reflected most obviously in Toyota’s repeated decisions to source from Canada because it offers the best mix of highly skilled workers and affordable health care.

Is that in fact right? No one talked about the burden health care costs put on manufacturing in his country during the bailout? I find that particularly shocking given that the bailout took place at the time when all the policy decisions on health care reform took place, and if anything, health care reform will make manufacturing health care costs worse.

Rattner: I wasn’t involved in the broader discussions about health care reform, nor am I a health care expert. We were certainly aware of the burden that health care costs put on the Detroit 3, but the creation of the VEBA’s solved that problem with respect to the retirees.

emptywheel: Right. But in all your coversations [sic] with Geithner and Summers and Rahm, was there honestly never a discussion about health care? No comment about ways the health care reform could have been formulated to contribute to the success of the bailout (and, more importantly, make sure that the effort ended up keeping the jobs that were saved in the US).

Rattner: No. There simply wasn’t time.

I understand the time constraints of all this. Though one of the parts of healthcare reform that will most directly affect the automaker healthcare costs, in a bad way, is the excise tax, and that wasn’t finalized until months after Rattner left government, which left five months for him to remind his buddies in the White House that their plan for healthcare was not going to bring down costs for US manufacturing companies, and it might well make them higher. Furthermore, it seems like an important enough issue–given the investment in both programs–to make time to address this issue.

Then again, I guess the healthcare team was too busy talking to Pharma to make time to talk to manufacturing.

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  1. klynn says:

    Furthermore, it seems like an important enough issue–given the investment in both programs–to make time to address this issue.

    Then again, I guess the healthcare team was too busy talking to Pharma to make time to talk to manufacturing.

    Smacking my forehead at the lack of forethought and lack of logic by a man thought to be known for his numbers smarts.

    How many times did we both write on this issue when writing about the about auto industry? I lost count. It is not like no one was failing to suggest the idea that the two (health care costs, auto industry failing) were related.

    • beowulf says:

      LOL, thanks for reminding me of the Nova. A decent car with a terrible name for Spanish-speaking market (“no go”).

  2. DeadLast says:

    In a similar vein, Republicans now talk about the need to cut government spending without ever mentioning two wars and a bloated military. Being blind to the obvious has not proven to be a successful evolutionary strategy.

    • eCAHNomics says:

      Being blind to the obvious has not proven to be a successful evolutionary strategy.

      In general your point is spot on. However, this particular part of your comment: have you thought about how long it takes evolution to eliminate every species, let alone, members of a particular species, who is blind to the obvious? Not is our lifetimes.

      More generally, this post is wonderfully funny, if you think FUBARs are funny.

  3. thatvisionthing says:

    emptywheel: Right. But in all your coversations [sic] with Geithner and Summers and Rahm, was there honestly never a discussion about health care? No comment about ways the health care reform could have been formulated to contribute to the success of the bailout (and, more importantly, make sure that the effort ended up keeping the jobs that were saved in the US).

    Rattner: No. There simply wasn’t time.

    Amazing. And yet that was the question that brought the house down in the Dem presidential primary debates.

    I mean, Obama was there. That did not register?

  4. thatvisionthing says:

    coversations [sic]

    heh. what they do in an administration that never looks back and never upholds a law. Kinda perfect word there. War criminals and Wall St. fraudsters have no fear, the coversators are here. The coversator is in, nickle please.

    • Gitcheegumee says:

      WSell, the Department of Labor stood up for the FIRST time ,regarding the work and health related systemic violations at Massey Upper Branch mine,yesterday.

      (Remember ,Bobby Ray Inman was/is on their Board of Directors?)

      Forthwith an excerpt from the DOL announcement:

      News Release

      MSHA News Release: [11/03/2010]

      MSHA asks for preliminary injunction against Freedom Energy Mining Co.

      Action against Massey-owned mine never before initiated in agency’s history

      ARLINGTON, Va. — In an unprecedented legal move, the U.S. Department of Labor’s Mine Safety and Health Administration today filed with the U.S. District Court for the Eastern District of Kentucky a motion for preliminary injunction against Freedom Energy Mining Co.’s Mine No. 1. Located in Pike County, Ky., Freedom’s Mine No. 1 is owned by Massey Energy Co.

      Section 108(a)(2) of the Federal Mine Safety and Health Act of 1977 provides for injunctive relief against noncompliant mine operators who habitually violate health and safety standards. In this particular case, Section 108(a)(2) calls for an injunction because Freedom Energy is engaged in a pattern of violation of the mandatory health and safety standards of the Mine Act, which constitutes a continuous hazard to the health and safety of the miners at Mine No. 1.

      “Freedom Energy has demonstrated time and again that it cannot be trusted to follow basic safety rules when an MSHA inspector is not at the mine,” said Joseph A. Main, assistant secretary of labor for

      mine safety and health. “If the court does not step in, someone may be seriously injured or die.”

      “Although this is the first time the department has utilized this legal remedy, it will not be the last,” said Solicitor of Labor M. Patricia Smith. “The solicitor’s office will work closely with MSHA to ensure that we use every tool possible to keep miners safe.”

  5. Petrocelli says:

    Yep, this was always a puzzle for me too … why didn’t AmeriCorp push for a Health Care Plan like us Canucks/Europeens have.

  6. phred says:

    This was something that baffled me throughout the health care debacle — where the heck was corporate America? I really expected the large employers to push back against AHIP, PhARMA, et al., because employer-based insurance makes them less competitive globally.

    I cannot believe that Rattner or anyone else in the administration was dumb enough to not consider the competitiveness problem posed by our health care system. I suspect there must have been back channel phone calls between various CEOs facilitated by the Chamber of Commerce, because nothing else makes sense.

    Someone had to be buying a bunch of other someone’s off.

    • Petrocelli says:

      Someone had to be buying a bunch of other someone’s off.

      Yep, that’s about the size of it. I thought they were silent because they were getting everything they wanted in the Health Care Reform, to be competitive.

      • phred says:

        There are 3 fundamental problems with the US health care system:
        1. an employer-based system cannot cover everyone (since not everyone is employed and not every employer provides coverage)
        2. the staggering costs
        3. an employer-based system puts US employers at a significant competitive disadvantage in the global marketplace

        US employers should have been screaming about #2 and #3, not a peep. Something was rotten in Denmark.

    • beowulf says:

      This was something that baffled me throughout the health care debacle — where the heck was corporate America

      In a sentence, what’s the matter with Grosse Pointe? Just as there are working class conservative who vote against their economic interests, there are auto (and other corporate) executives who vote against their own economic interests as well. Roger Lowenstein’s discussed this point in his excellent book about corporate and municipal pensions, While America Aged. From the 1940’s on, UAW leader Walter Reuther tried to sell the Big 3’s auto execs on joining unions in lobbying DC for single payer healthcare and universal pensions (the simplest solution would be to expand the Social Security system to make corporate pensions redundant).

      Reuther kept explaining to the Big 3 that offloading healthcare and pensions to Uncle Sam would make them more profitable in the short term and more finanially stable in the long term. But the suits, good Republicans all, wouldn’t hear of it.

  7. Knut says:

    Here’s a simple reason why Ford or GM can’t make a Corolla. It doesn’t pay. Americans are big (fat)people, especially in the mid-west and the South where they still disproportionately buy American cars. Corollas are too small for these people, Half of them can’t even fit into a regular size airline seat. They need BIG cars. They want big cars. They don’t feel comfortable in cars that feel like they make their shoes pinch.

    The American auto market is bifurcated. The small car market is highly competitive because the Europeans and East Asians specialize in cars suited to the size of their customers. For GM or Ford or Chrysler to compete in that market is suicide. There just isn’t enough business. The business is FAT people.

    • marymccurnin says:

      I read a study last year about fat Americans. It turns out that they are fat across the board. California peeps are just as fat as Tennessee peeps, etc. Where did I put my bucket o fried chicken?

        • tejanarusa says:

          That’s true! I saw it recently somewhere. Didn’t surprise me. When I lived in Boston, using public transportation and my feet, not owning a car, I was in muuuuuuch better shape.

          Been enjoying the current temp assignment partly because it’s downtown and I go out and walk around the city blocks. Love it.

      • Petrocelli says:

        It’s right there, twixt yer 3rd & 4th Chins, Honey …

        *Ducks and Runs totters off, huffin’ an’ puffin’*

    • eCAHNomics says:

      When I worked on Wall St., my one-liner on U.S. auto mfgrs was: can you imagine what U.S. produced autos would be like without Japanese competition?

      That was about 2 decades ago. But it was meant to embody all the comments made so far. Really really dumb execs as the primary cause, because they had an oligopoly that they leached off for as long as they possibly could. OLIGOPOLY! Got that????

      Then as secondary, tertiary, quad causes, all of the other factors that are mentioned.

      • Petrocelli says:

        Really really dumb execs as the primary cause, because they had an oligopoly that they leached off for as long as they possibly could. OLIGOPOLY! Got that????

        Yep, can’t be said often or loud enough, eCAHN.

    • Petrocelli says:

      For GM or Ford or Chrysler to compete in that market is suicide. There just isn’t enough business.

      Erm … you do know how many Corollas have been sold thus far, right ?

      Worldwide sales are at 30 Million and counting.

      • bmaz says:

        The Chevrolet Cruze, released a little less than 60 days ago, is positioned squarely at the Corolla in the market and is getting reviews that consistently place it as good or more favorably than both the Corolla, Honda Civic and Nissan.

        • cregan says:

          Interesting. Hopefully, it will still be considered a good competitor after a year on the road. That’s what I need to see; will the car hold up over time?

        • bmaz says:

          Yes, there is no reason to believe it will not; the engineering and production values appear quite good relatively. The one concern I have is that the new management at GM (many of whom have been dropped in from slashing and outsourcing businesses like telcos by the Rattner finance whizkids) will reach for production cheapening moves that would harm the current quality values. Should that happen, then things could slide back downhill, but right now it looks very solid. The Cruze looks to be exactly what the Malibu has been in the next market segment up, and that is a more than competitive product, indeed superior in many experts’ eyes.

    • suza21 says:

      That is plain bull. My brother who has a thyroid condition and weighs well over 450lbs drove a 1987 Chevy Nova- the NUMMI- Toyota/Chevy version made in California that was a duplicate of the Corolla and it fit him fine. He and his family used it for 20 years. They now use a hybrid. But bottom line, why do we need to be worried about people’s size? It really is none of our business what people’s physical, emotional, or genetic health is. What we need to do is have a single payer plan that offers people the ability to address their problems with medical privacy guarantees and not try to shame them because of these issues.

  8. tejanarusa says:

    This is incredible, but somehow, sadly, I am not really surprised. they seem to compartmentalize,and yeah, ignore the obvious.

    Witness, for very current example, as discussed by Maddown and Collins a few minutes ago – no pushback using the perfect opportunity presented by the repubs refusing to recognize that continuing the rich folks’ tax cuts without payng for them (even David Gregory got it! Didja see Boehner’s face?) will add $700 billion TO the deficit.

    This bunch – along with most democrats it seems – just is constituionally incapable of taking advantage of ANYTHING. They just can’t see it.

    Face palm, over and over and over….

  9. Knut says:

    The traffic in my town (Montreal) is so bad that I take the bus and metro when I have to go downtown. It used to take 10 minutes; now it takes 30. Add the gas and the parking and the aggravation. To hell with it, I’ll take the bus. The geezer’s discount on metro fares doesn’t hurt either.

  10. Petrocelli says:

    Hmmm … 3 comments in a row means I gotta make a Large Pitcher of Chocolate Martinis for the WheelHeads … BRB !

  11. mzchief says:

    So the remorseless remoras of sloth and short-sightedness are stumbling from country to country attempting to leach off vital societies stammering “We’re Here to Eat Your Brains, Bitches!” (hattip Toby Wollins)?

  12. GlenJo says:

    I’d say the simplest explanation is that by then HCR was being negotiated in the Senate so tying the two processes was out of their control. Still, it’d would be best to develop the time line.

    The obvious question is if Rattner was being kept away from HCR and even the Wall St bailout. After all, GM actually had to go through BK, something that they apparently never considered with the banks.

    Does this somehow tie into Rattner’s comments that Ms. Blair was a big pain in the butt?

  13. progress says:

    No sane company which is profit oriented will run production shop in United States as long as Health Care Costs soar relative to costs in other countries. It simply does not make business sense.

    Middle Class Income will be siphoned away with Individual Mandates with no oversight at all at a huge Social Costs.

    On the up-side we will get to know about $3 million a plate dinners instead of current going rate of $30,000 a plate dinner from fellow bloggers during election cycle and can gossip about rich and famous while unable to take care of our personal responsiblitlies.

  14. hackworth1 says:

    The Chamber of Commerce maligned US automakers and their “Legacy Costs”

    on a daily basis. Disgusting Bastards.

    The Chamber of Commerce never made the connection that Nationalized Health Care would save American businesses millions of dollars. Rethuglican Thugs.

    The Chamber of Commerce, spending millions on ads, maliged HCR until the Public Option was dead. Until they were sure that the common citizen would not gain a single benefit.

  15. democrat says:

    Back in 2005 I was working with a guy that went to Harvard Business School with Rick Wagoner. One day he came in and said he was having lunch with Wagoner the next week. I gave him this question to ask Rick: “When is GM going to come out for single payer health care?” My friend asked Rick this question and Rick gave him a non-answer, but did say that they had been considering it. And, in addition, at that time Rick had given a number of speeches to that effect saying that health care was killing them and was the number one concern of GM’s executives as it was draining the company dry. I’m thinking that Rick actually pushed the Obama administration to pass a real health care package and that might be part of the reason that he got the boot. Obviously the Obama administration didn’t even TRY to pass the public option, let alone single payer. The health care “reform” that did pass is completely useless to just about everybody.

    • bmaz says:

      I also have heard that percolated at the higher levels of GM, and really it makes a whole lot of sense from management perspective. You wonder why a coalition of huge US corps didn’t go that route long ago.

    • progress says:

      The health care “reform” that did pass is completely useless to just about everybody.

      It is not useless but making the current situation worse.

      Let me ask one logical question.
      When does one take the huge risk of going without insurance. When one cannot afford it. Now go and try to siphon money from that individual stating it is individual mandate to give. How will that individual can even feed, provide shelter or clothing to his family.

      If taxes go out of bounds of affordability one elects the party which promises to reduce it. If taxes go too low and common resources are crumbling one can vote for the party raising taxes and fixing it.

      If Individual Mandates go out of bounds of affordability which is guaranteed by all means with all signs of not allowing drug importation, public option blatent mis-direction & lies, medicare buy in not allowed, single payer not even discussed with for-profit AHIP and Pharma who are we going to petition to fix it their board, does it have one vote per subscriber for majority will to prevail. Still cannot believe Party of Pres. Thomas Jefferson put in these liberty stifling Individual Mandates.

  16. jakegittes says:

    and the way that contributes to profitability (or lack thereof) for car companies that manufacture in the US, as reflected most obviously in Toyota’s repeated decisions to source from Canada because it offers the best mix of highly skilled workers and affordable health care.

    Oh, and I supposed Toyota wants to shut down the Pentagon too!

    /Robert Gibbs

  17. jerryy says:

    “Then again, I guess the healthcare team was too busy talking to Pharma to make time to talk to manufacturing.”

    I think you have it right.

    They also ignored all the evidence easily available to them. In 2009, Norton Healthcare (Louisville, Kentucky’s largest healthcare provider) fought a battle with Anthem and Blue Cross (largest health insurer) over rate increases. It was a serious battle over money with folks being denied insured coverage, i.e. they had to pay out of network fees, etc. Norton won and some very serious rate increases were passed onto consumers.

    The reason this should have been noted by the healthcare team by way of the manufacturing team? Because Ford has a major manufacturing plant in Louisville and Toyotas are built in Georgetown, Kentucky (just down the road from Louisville).

    • thatvisionthing says:

      Norton won and some very serious rate increases were passed onto consumers.

      Who’s the good guy?

        • thatvisionthing says:

          Probably the same could have been said about the railroads when the Wright Brothers flew at Kitty Hawk. Next question would be, where would you invest?

          Also, regardless of whether you invest in Tesla or GM, as long as the economy shovels all its real resources out of people and into Wall Street fantasy fraud and bonuses, it’s going to go bust again. I assume these cars will be financed… and there you go again.

        • bmaz says:

          Oh, I would invest with GM over Tesla by a fucking hundred miles. Elon Musk does not know his ass from a hole in the ground about successful automobile manufacturing; he is a complete dilettante in the field. If you do not believe me, just ask any number of his seed investors and the engineering guy that did all the real work. Now Fisker I might invest in, and know several people that have; but Tesla, not a chance. Hard to believe someone could make a Lotus Elise any uglier, but Tesla pulled it off. Bleech.

        • thatvisionthing says:

          See bmaz, I defer to your knowledge and experience — I don’t know any of those people or those stories. So I wish you would turn your head toward finding the way to make investing in a car/energy solution to be the same as investing in the planet and its noncorporate people and animals and seas and mountains and rivers. Because so far you won’t recognize that you’re at cross purposes, and that the opportunities from the crisis to get out of the box of fail have been pretty much horribly wasted on an attempt to go back and float the damned TBTF Titanic again, from the top down, without ever fixing any of the things that caused it to sink in the first place: Stupid leadership and weak rivets and a hole in the bottom. Thanks JP Morgan!

          Say again: Ahoy ahead the icebergs! Wake up captain, wake up!

          You know what I think is the most poetic thing about the Titanic, btw, the ship that “even God couldn’t sink”? The name of the captain of the Californian, the ship that was close enough to rescue the passengers but whose captain wouldn’t wake up and it didn’t go; its lookout saw the distant flares getting lower on the horizon and thought the big ship was partying on its way. All those prayers that night. Deaf Captain Lord.

          GM needs to look outside the box. We’re all in this boat together. Trouble is, I don’t think GM CAN look outside the box.

        • bmaz says:

          GM is set up to thrive currently, but it all depends on keeping new and attractive product in and out of the design pipeline and maintaining the level of production quality they have worked really hard on attaining over the last 8 years or so. I have real concerns that the phone boys and financiers the Obama Admin and govt have put in place to run the New GM really get it and worry they will try to cut corners on design and production. There are faint signs that may already be occurring, but it is too early to really get a read. I would actually at this point love to have Wagoner, Henderson and Lutz still around.

          As to EVs, go check out Fisker, that is a pretty exciting enterprise. If they can keep moving forward, I think they are set up for the long haul better than Tesla, and their products are a lot more attractive too.