The GM Ripple Effect Continues

Submitted by Jen Jones on Mon, 06/22/2009 - 12:00pm

The GM Ripple Effect Continues

Bucking the trend, 2008 was a prosperous time for Delta Dental -“ the largest dental benefits carrier in the country. And things were looking good for 2009 as well. In fact, Delta Dental employees in Okemos, Michigan were getting ready for a significant office expansion -“ last year the company announced it planned to tack on an additional 25,000 square feet of office space in 2009. But then . . . GM filed bankruptcy, and all of a sudden 2009 doesn't look so promising anymore.

You might be wondering what GM's bankruptcy has to do with Delta Dental. Sure, we've all heard about the obvious trickle down effects of GM's plight -“ major layoffs and cutbacks at scores of auto industry businesses in GM's chain of production and supply. But how could GM's bankruptcy have any relevance to the business of a dental benefits carrier -“ much less have a significant impact on the carrier's future prospects?

Answer: Because GM supplies a large segment of Delta Dental's customer base -“ United Auto Workers (UAW) retirees. Under its labor contract with the UAW, GM has always provided retirees with dental insurance benefits through Delta Dental. The number of retirees carrying these policies is significant, especially in Michigan. As part of its plan to survive bankruptcy, however, GM has decided to cut off these benefits, leaving UAW retirees to pay the insurance premiums on their own. Undoubtedly, many retirees will shop around for cheaper carriers or just opt to go without dental insurance. Either way, Delta Dental will take a big hit, and may find it doesn't need much of the new office space in Okemos anymore.

The ripple effects of GM's bankruptcy have also reached another pocket of the economy that wouldn't normally come to mind: the sports industry; specifically, auto racing. GM recently announced it will cut off all sponsorship of NASCAR's Nationwide Series and Truck Series. And, just last week, GM announced it will cut back its financial support of the Sprint Cup Series. This will force numerous high-profile motor-sports teams to find support elsewhere, including Hendrick Motorsports, Stewart Haas Racing, Earnhardt Ganassi Racing, and Richard Childress Racing.

While NASCAR officials remain hopeful that GM will eventually be able to provide greater support again, they are currently seeking sponsorship from foreign manufacturers. In the meantime, auto racing fans are likely to see less and less of GM's iconic bow tie symbol in the racing series.

From dental insurance providers to the auto racing industry, and seemingly everywhere in between, the ripple effects of the GM bankruptcy continues. Add Chrysler's financial debacle into the mix and it seems the fallout in the auto industry will push economic recovery further and further into the future.

From: The Law Offices of John T. Orcutt, with convenient office locations in Raleigh, Durham, Fayetteville, and Wilson. Call (toll free) +1-919-646-2654, to set up a free, confidential debt consultation. Visit www.billsbills.com for more information.

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