Preston Crabill '76 makes a point during his April 3 lecture.
Preston Crabill ’76 returned to Lehigh on April 3 to talk about labor relations and healthcare negotiations—and the many sleepless nights he’s had lately as the director of pension and savings plans at General Motors (GM).
That’s because Crabill spent most of the past year in negotiations with the United Auto Workers (UAW) union drafting a new healthcare agreement between the two parties. It’s no small accomplishment—healthcare plans cost the company $5.3 billion last year alone.
“We have been working for a long time…to improve the state of healthcare within GM,” Crabill told 120 people in the audience that night at the Rauch Business Center. GM is the largest private purchaser of healthcare in the US, accommodating over 1.1 million people—including 455,000 retirees and spouses spread out across every state in the country.
During the hour-long presentation, Crabill reconstructed the events leading up to GM’s historic healthcare bargaining agreement with UAW. He explored GM’s healthcare background, current industry trends, and the relationship between GM and the UAW—the powerful labor union to which GM employees belong.
At issue was GM’s healthcare benefit package. Crabill was a lead architect in the GM-UAW negotiation process, which was concluded in October 2005 after year-long discussions between the parties. The final agreement was amenable to UAW membership, who endorsed the plan with a 61 percent majority vote in November. The agreement was officially approved in late March, when a U.S. district court in Detroit let the new plan stand.
Before the latest round of discussions in 2005, GM and UAW worked collaboratively to tackle similar increasing cost pressures in 1993, 1996, 1999 and 2003. The 2005 healthcare agreement runs through September 2011.
Crabill also addressed the changing global environment of the automobile industry. New challenges presented by a variety of market forces—including GM’s dwindling market share and the unsustainable rises in healthcare costs—necessitated both parties to come back to the table.
He noted that GM spends nearly $1,500 per vehicle on healthcare costs. Conversely, Japan’s Toyota spends just $100 per vehicle on healthcare costs.
Taken together, it’s a $1,400 immediate disadvantage for GM, per car, against its global competitors. And it’s a discrepancy that needs to be addressed soon in order for GM—and other American car manufacturers—to remain competitive.
"Agreement in which every comma makes a difference"
“We were going through what was really a new and uncharted direction for both GM management and UAW,” said Crabill. “We had a challenging set of business conditions and we had to step up together.”
That’s why the bargaining process was so deliberate and thorough.
“We were very open and honest, and analyzed every piece of data to make sure UAW understood our competitive position,” Crabill said. “We negotiated a very extremely difficult document … one in which every word has a meaning and every comma makes a difference.”
“This truly was an historic agreement negotiated by GM and UAW,” added Crabill. GM will save over $1 billion in cash and $3 billion in expenses as part of the deal, and both parties can continue to pursue additional opportunities to explore additional cost reduction initiatives in the future. An extra $15 billion will be saved in scaling back its post-employment health care package.
That news capped a tireless, year-long campaign by GM and the UAW to compromise on healthcare, but other labor debates continued to loom. Just recently, GM also announced an “hourly special attrition program,” and sold 51 percent of its ownership in GMAC.
All these developments are meaningless, though, if GM doesn’t find ways to remain competitive on a global scale. “If GM doesn’t get the product right, then all these other efforts are in vain,” Crabill explained. “People need to buy our cars.”
That may begin happening soon as the Asian market ramps up. GM corners about 25 percent of the US market—a substantially smaller portion than the majority position it held only 30 years ago. But now that China is GM’s second largest automobile market, new opportunities are beginning to present themselves.
What does this mean to companies like GM? “You really need courage, leadership, stamina,” said Crabill, “because we solved all the easy problems years ago.”
Posted on Friday, April 07, 2006