A plan by ArvinMeritor Inc. to curtail health care costs eventually will eliminate coverage of retired employees.
Starting in April, the Troy, Mich., supplier will require retirees under 65 to double their contributions to their health insurance plans.
The company will eliminate supplemental health coverage of retirees over 65 on Jan. 1, 2006. On that date Medicare will begin to provide prescription-drug benefits to clients of the federal program.
ArvinMeritor retirees in the United States and Canada who are under 65 will face annual increases in their health care contributions until 2023. At that point the company will end health care coverage of retirees.
Rich Greb, ArvinMeritor's senior director of benefits, says the company's spending on health care is rising 10 percent annually. Medical care is one of the supplier's fastest growing expenses, he says.
"The health care changes are due to the cost pressures we're under and the industry we're in," Greb says. "With the changes taking place in Medicare, we hope to eliminate those costs. We gave our employees advance notice of our changes so they could prepare."
ArvinMeritor has 32,000 full-time employees. It has 5,000 retirees over 65 and 2,000 under 65 in the United States and Canada. Arvin Meritor sent letters explaining the health care changes to retirees last week.
ArvinMeritor retirees under 65 pay $50 a month on average for health benefits. The company pays about $450, officials say. Retirees over 65 pay about $25 a month for health coverage, and the company pays about $225.
Greb says the health benefits the company provides its active employees are "under review."
The UAW and United Steelworkers of America represent some of the affected retirees.
A UAW official declined to comment on the changes in ArvinMeritor benefits. Steelworkers union spokesman Michael O'Brien says the changes are subject to collective bargaining.
ArvinMeritor makes aperture and undercarriage systems, drivetrains, braking and suspension systems and emission control devices. It ranks No. 18 on the Automotive News list of top 150 suppliers to North American automakers. It had nearly $2 billion in sales in 2003.