Ford Puts the Brakes on Retirees’ Health Benefits

Ford Motor Co. will end health benefits for its salaried retirees beginning in 2008, following the lead of DaimlerChrysler AG’s Chrysler Group, which announced this year that its white-collar workers would be given a stipend to put toward their health care.

Beginning January 1, Ford will put $1,800 into health retirement accounts for its Medicare-eligible retirees. The company disclosed the news in an e-mail to employees November 1 and in information packets sent to its retirees. Retirees’ spouses or domestic partners will receive an additional $1,800, according to Ford spokeswoman Marcey Evans.

“We want to be able to continue providing quality health care benefits,” Evans says. “But we also have to offset increasing health care costs we’re experiencing each year.”

To cut down health care costs, Ford will ask salaried employees to pay a greater share of health care premiums in 2007, though an exact amount has not been determined, Evans says. Ford introduced a high-deductible health plan among its five health care plans this past year.

Like other U.S. car manufacturers, Ford has been beset by huge losses and sharply rising health care costs. The company posted a $5.8 billion loss in the third quarter of this year and spent $3.5 billion last year on health benefits that covered 590,000 employees, retirees and dependents.

The money will be put into a health retirement account and can be used, tax-free, on health care spending, including co-pays, premiums and deductibles not covered by Medicare.

In another sign of the effects of high health care costs, in addition to the other financial woes afflicting Ford, the company told its salaried employees that it would be freezing wage increases for the year. Ford says it will reinstate a company match for employee 401(k) accounts. Beginning July 1, 2007, Ford will contribute 60 cents for every dollar that employees contribute toward their pension, totaling no more than 5 percent of an employee’s salary.

Chrysler announced in March that it would provide a flat annual sum of $1,750 to retirees over age 65 beginning in January 2007.