Chrysler to Trim Health Benefits

DaimlerChrysler’s Chrysler Group, facing a 4.5% increase in healthcare costs this year, said Wednesday that it would reduce medical benefits for salaried employees and retirees.

Chrysler, the No. 3 U.S. automaker, is raising monthly healthcare premiums for nonunion U.S. workers, with the size of the increase based on salary, and adjusting benefits for retirees. The changes, effective Jan. 1, apply to 13,800 salaried workers and 17,600 nonunion retirees.

General Motors Corp. and Ford Motor Co., the No. 1 and No. 2 U.S. automakers, also announced cuts to salaried workers’ health benefits in the last few months after securing concessions from the United Auto Workers to cut benefits for unionized employees. The union hasn’t reached a similar agreement with Chrysler and is reviewing the company’s finances before talks begin.

The cuts send a message to union workers that all of Chrysler’s “constituencies are making sacrifices,” Burnham Securities Inc. auto analyst David Healy said.

“We realize if you’re asking one group to sacrifice, you have to ask them all,” Chrysler spokesman Jason Vines said.

In 2005, Chrysler spent $2.2 billion on healthcare for 375,000 workers and retirees and their dependants, and medical costs have almost doubled since 2000, the company said.

Mid-level managers will pay an average of $450 more for healthcare coverage in 2007, and the average executive will contribute about $1,500 more, Chrysler said. Some lower-paid salaried workers won’t see an increase.

For retirees younger than 65, premiums will also increase based on the employee’s salary level when he or she retired. For those older than 65, Chrysler is establishing a healthcare account of $1,750 for the employee and an additional $1,750 for a spouse or domestic partner. The retiree can decide what type of health coverage to elect using those funds.

Chrysler, unlike GM and Ford, is profitable in North America, and its sales grew in 2005. That profitability “will make it more difficult for Chrysler to sell these healthcare cuts to the rank and file,” Healy said.

Also Wednesday, Ford said it would charge U.S. salaried employees a fee for health insurance for spouses and same-sex domestic partners who have access to other coverage.

The surcharge will be $110 a month for health insurance and $11 a month for dental coverage, spokeswoman Marcey Evans said.