Human Capital & Careers

GM Predicts Rising Heath-Care Costs

GM expects a $170-million hike in post-retirement health care costs tied to general price increases and a cut in the company's discount rate.
Stephen TaubNovember 15, 2004

Officials at General Motors Corp. expects retiree health care costs to rise next year.

In its quarterly regulatory filing with the Securities and Exchange Commission, the world’s largest car maker predicted that health-care costs will rise by at least 10 percent in 2005. The filing also said the GM plans to cut the discount rate it uses to determine future health care obligations to 6 percent from 6.25 percent.

This could cause GM’s post-retirement health-care expenses to rise by about $170 million next year, according to Reuters. In addition, the new discount rate would raise the GM’s health-care cost estimate for 2005 by $1.9 billion. That calculation includes health care spending for the company’s 1.1 million current workers, retirees and their dependents, the news service reported.

What’s more, GM assistant treasurer Mark Newman told Reuters that those figures could climb higher based on a faster-than-expected increase in health-care costs.

Last month, it was widely reported that GM was one of at least six companies that admitted to receiving requests for information from the SEC about accounting practices used in calculating pension and other post-retirement benefit costs.

In addition, Moody’s Investors Service recently cut the debt rating on GM to two levels above junk.

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