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RENEE MONTAGNE, host:

General Motors celebrates its centennial this year. For decades the giant company sold its Bonnevilles and Bel-Aires, Corvettes and Cadillacs, and showered shareholders with profits. The next hundred years might not be so glorious. Foreign competitors like Toyota sell as many cars as GM; gas prices are high and there's one other major problem: pensions. American automakers are paying big money to workers who retired long ago.

In a new book, journalist Roger Lowenstein explains how GM's generous pensions nearly felled the automotive giant, beginning with a policy known as 30 and Out.

Mr. ROGER LOWENSTEIN (Author): No matter how old or young you were, once you had been 30 years on the job, you could get your pension for life. And if you think of an autoworker, typically they'd go work as young as 18, 19. So by the time they were 50 or even younger, they would have a pension. And you know, with people living longer now, into their 80s, the manufacturer - GM or whoever - might well be taking care of them for even longer than they were working.

MONTAGNE: And apparently often has been starting to.

Mr. LOWENSTEIN: Yes. I mean there was a case of one GM worker who lived to 111 and carried pension and retiree health benefits for more than a half century. It's very, very difficult for any company to envision what sort of shape it will be in 50, 60 years hence to make promises to workers, certainly when GM first began granting pensions, which was 1950. They couldn't have any conception of the shape of the auto market, competitors such as Toyota, others arising.

And to make these sort of commitments was more than it turned out that they could handle.

MONTAGNE: Now, there are several characters who play big roles in your history of GM and pensions. And one of them is the legendary United Auto Workers leader Walter Ruther. He won huge concessions back around World War II, or just after World War II.

Mr. LOWENSTEIN: Yes. And the interesting thing to me about Ruther, one of the interesting things, was in the very beginning, when he was first after World War II fighting for pensions, healthcare, what he called social insurance, like many labor leaders of the day he saw himself as fighting not just for his particular constituents, auto workers, but for all working people and for all Americans. And he wanted all Americans to get these benefits.

He also recognized that they could be difficult for the auto companies to deliver. So he said to the auto companies, why don't we go down to Washington together and fight together for these things from the government. Of course, this would have been a good thing as it turned out for the auto companies. It would have saved them this terrible burden. But at the time anything that had a whiff of collective or government benefits or guarantees was socialistic and they wanted no part of it.

So - well, Ruther said, fine, you know, we'll take it from you folks.

MONTAGNE: That, though, is one of the great ironies that you spotlight that business was determining who would carry the burden of benefits for several generations and big business and the auto makers were choosing themselves.

Mr. LOWENSTEIN: That's right. Well, if you were an auto customer or client, you went to the showroom, whether you went to GM or Ford or Chrysler, you didn't have much of a choice. If you wanted to the tailfins, you got the pension along with it. Meaning, you know, you had to pay for the workers' pension, so they all just passed along the cost. There was no disadvantage to them really of awarding these benefits.

And they made the mistake of thinking that this would always be the case. What happened to totally change the landscape - it was just about 1973 - by then the Japanese had entered the American market and suddenly consumers had the choice. You could get the Chevy with the pensions or the Toyota without it.

MONTAGNE: Well, still looking back, over the years, GM, Ford, others kept signing on to these deals with labor that made pensions more and more generous. Didn't they realize what they were doing?

Mr. LOWENSTEIN: You know, they may have but there is a sort of fatal temptation with pensions, which is unlike other expenses they don't come due until later. So managers were continuously tempted to say, look, if I don't give the union what it wants we take a strike now, maybe the other manufacturers will stay running; we'll lose marketplace share. So right here and now it's easier to give the pension and worry about paying it later. And they did that and they did that and they did that.

MONTAGNE: You do have a section in the book where you say that General Motors - and this would have been in the '80s - actually fooled with the numbers to make sure that this looked like a good deal for them.

Mr. LOWENSTEIN: That's right. By the 1980s everybody knew that pensions and the associated healthcare benefits for pensioners, for retirees, was a very serious problem. And so during the Roger Smith era - he was one of the chairmen of General Motors - they played games with the pension funds. They made an adjustment and assumed for the purposes of calculating how much had to go into their fund that the workers would live on average two years less than really the actuarial consideration would have it.

That meant they could put less money in. Didn't mean the workers were really going to die sooner. It just meant on paper GM could put less money in.

MONTAGNE: Short of bankruptcy, is there any way for a company to get out of its obligation to pay these pensions?

Mr. LOWENSTEIN: Short of bankruptcy, unless the CEO is willing to hop a flight to Brazil, you know, after having taken everything from the treasury, no, you can't get out of it.

MONTAGNE: At this point in time, given everything that's changed, do you see workers as well as the companies themselves coming around to this? I'm thinking about the deal that the UAW struck on healthcare with the Big Three last year, where the companies put billions of dollars into a special fund, then handed over the responsibility for health care and the fund to the union. Is that a model for the future?

Mr. LOWENSTEIN: I think it's a clear warning signal that the model we have been living with for the last few decades of corporate healthcare could be going by the boards. Again, in an era where A) healthcare costs are so astronomical, where people are living longer, and where people no longer stay for their whole careers at companies; I think more and more companies are going to be backing away from healthcare, as they have been doing.

And it's not only, you know, heavy manufacturing companies but, you know, Starbucks pays more for healthcare than for coffee beans. So when you get that latte, you think you're buying the foam and the Jamaican coffee; you know, you're really paying for somebody's replacement hip.

MONTAGNE: A very powerful image, and one which actually in a way you feel maybe better about spending $4.50 on a double mocha...

Mr. LOWENSTEIN: Well...

MONTAGNE: ...if you're helping someone, you know, with their replacement hip.

Mr. LOWENSTEIN: It just takes us back to what Ruther said, that shouldn't this be a government obligation? It's obviously a theme of the Democratic primary campaign. And even John McCain has proposed something quite interesting, which is if you get healthcare benefits, pay a tax on it, but then let's refunnel the money out to everybody and in effect get the government in the business of providing some universal healthcare benefit. They're finally getting to where Walter Ruther was in the late '40s.

MONTAGNE: Thank you very much for joining us.

Mr. LOWENSTEIN: Renee, it was a pleasure.

MONTAGNE: Roger Lowenstein's new book is "While America Aged: How Pension Debts Ruined General Motors, Stopped the New York City Subways, Bankrupted San Diego, and Loom as the Next Financial Crisis."

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