Health Care Costs a Line to Watch at GM

It's no secret that GM's huge pension and health care liabilities weigh heavily on the company's balance sheet. But little has been said about a recent change to projected health care costs that could boost earnings in 2002.

In a financial filing made Feb. 25, GM said that health care costs were expected to rise 6% in 2002. Compare that with its 2000 annual report, in which it said the growth rate of health care costs would drop to 8% in 2002, from 8.5% in 2001.

A seemingly small drop in a seemingly obscure number, it would appear. However, that adjustment will allow GM to avoid $100 million to $120 million in 2002 costs, according to a calculation by Eric Feldstein, GM's treasurer. That's not an irrelevant sum for a company that had net income of $1.5 billion in 2001. Total health care expense in 2002 is projected at $3.9 billion, says Feldstein. ...