Washington, D.C., Jun 6, 2007 - Tom Sasorda, president and CEO of the Chrysler Group, strongly believes that healthcare costs are putting the US auto industry at a disadvantage. Following his statement in entiredy, from this week's Senate Democrats 2007 Manufacturing Summit.
"American manufacturing and a key component — the automotive sector — are at a crossroads," said Lasorda. "We are either going to adjust to the realities of the global economy or we will not survive. Our current cost model does not work and our competition gets fiercer every day.
"Most industrialized nations design policies to support their core domestic industries, which use that government support as a springboard to compete globally.
"Our history as a free and open society tends to push us to the other extreme in that we are hesitant to promote policies that help our industries. In fact, we tend to spend more time attempting to over-regulate.
"While I do not believe we are the same, there are some unfortunate parallels between the automotive and the old steel industry. These similarities include:
• Large numbers of bankruptcy filings by auto suppliers and steel companies;
• Large reductions in the numbers of employees;
• And staggering retiree costs that caused more than 200,000 retired steelworkers to lose health care benefits.
"The auto industry is caught in a box where overcapacity, incentives, brand proliferation, and the fight for market share has led to negative net pricing. To keep up with the competition as well as regulatory mandates, we continue to invest billions of dollars in research and development of new products and technologies.
"But as my colleagues Alan Mulally and Rick Wagoner [of GM and Ford] will agree, we do not have the flexibility to price in this market for structural disadvantages or new mandates.
"My comments today will address health care, while Alan and Rick will talk about trade and energy policy as two other keys to the competitive landscape.
"As you know, health care is one of the most rapidly escalating costs of doing business in the U.S. and is hurting our global competitiveness. This is particularly true in the manufacturing sector.
"Speaking as a representative of the auto industry, we are not afraid to do battle on a free and level playing field. In recent years we have tackled many of the competitive gap issues within our control.
"We have all improved productivity and are within striking distance of matching our foreign-based competitors. In fact, just last week the Harbour Report showed that the Chrysler Group’s productivity had increased an industry-leading 25 percent over the last six years. My company also has improved quality more than 40 percent over the past six years. And we have removed considerable costs from our operations.
"But as significant as these improvements are, they are not able to offset rising health care costs. The health care issue remains a major barrier to competitiveness, and this is an area where public policy can make a difference. I want to elaborate some on the challenges caused by high health care costs.
"Our three companies together provide coverage to over 2 million employees, retirees, and their dependents. Each of us has more retirees than active workers and we spend twice as much on health care for retirees than our active workers.
"In my company, we operate with an estimated $1,000 per-vehicle disadvantage to our Japanese-based competitors due solely to health care costs. Addressing this issue is one of the single most important factors to boosting U.S. competitiveness, ensuring a continued base for manufacturing and improving the health of our society.
"We are not sitting idly by, but are doing our share to control health care costs to the extent we can.
"For example, we are leading a promising initiative in Southeast Michigan on e-prescribing that aims to reduce errors and improve quality.
"Each of our companies offers Health Savings Accounts to our salaried employees as an option, and obviously health care is a major topic of ongoing discussions with our partners in the UAW.
"I believe we could all agree that some national approach to the health care problem is ideal but likely not feasible. Given the political reality, there are some important interim steps Congress could take to help bring more rationality to the health care market.
"We support adoption of health care information technology and applaud Senator Stabenow for introducing important legislation on that matter. We also endorse national metrics to measure quality for doctors and hospitals.
"In addition, we support efforts by members of Congress to create a process for the Food and Drug Administration to approve generic versions of biologically engineered drugs.
"And, finally, the overall well-being of the nation requires Congress to address the health care needs of pre-Medicare age retirees and catastrophic coverage. This is a core disadvantage for American manufacturers and it is driving the trend toward lost coverage.
"To sum up, we need our government to understand how its actions can either encourage, or set up roadblocks, to American competitiveness. I appreciate the opportunity to appear here today."