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GM Blames Health Care Costs For Earnings Gap

MANAGED CARE December 2004. © MediMedia USA
News and Commentary

GM Blames Health Care Costs For Earnings Gap

MANAGED CARE December 2004. ©MediMedia USA

Think employers aren't getting increasingly anxious to find some sort of solution to rising health care costs? Then you missed the recent story about General Motors jolting Wall Street with its warning to investors that health care costs are rising faster than the company expected. The chances of GM achieving its goal of $10 a share in net income within the next couple of years "has become much more difficult to obtain," GM spokeswoman Toni Simonetti tells the Wall Street Journal.

This follows GM's announcement last month that it would have to reduce its 2004 earnings forecast from $6 to $6.50 a share, down from $7 a share.

The Wall Street Journal reports that GM's North American automotive unit lost $22 million in the third quarter and it would have been even worse if not for two big, one-time-only influxes in revenue caused by the transference of $250 million in product liability reserves into net income, and a $151 million subsidy from the government, which last year provided assistance to companies to help with prescription-drug costs for retirees.

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