DETROIT -- The Detroit-based auto makers, struggling to cope with a growing pool of retirees as their work forces shrink, are being battered by soaring U.S. health-care costs that their competitors don't face and the issue must be addressed, senior executives of the Big Three said yesterday.

"This is an issue for all U.S. manufacturers, not just General Motors and not just the auto sector," Gary Cowger, president of GM's North American operations, told a group of Canadian reporters at the North American International Auto Show in Detroit.

"This issue is a competitiveness of the United States issue," Mr. Cowger declared.

Bill Ford, chairman of the second-largest U.S. auto maker, has been a vocal advocate of changes that would reduce costs for the auto makers, saying that the issue may lead to more automotive production being shifted out of the United States.

Mr. Ford offered a more restrained view yesterday in a meeting with reporters near his company's display at the Cobo Hall convention centre.

"Obviously, it remains a huge issue," Mr. Ford said.

The numbers are staggering.

The latest figures available showed that Ford Motor Co. paid $3.2-billion (U.S.) in health-care expenses for U.S. employees, retirees and their dependants in 2003. An astonishing $2.2-billion of that went to retirees.

That total cost puts Ford's health-care budget roughly on par with that of Nova Scotia, which spends about $3.7-billion (Canadian) annually.

But even the Ford number pales in comparison with that of General Motors Corp., which spent $4.8-billion (U.S.) in 2003 to cover 1.1 million people.

That is more than GM spent on steel for its vehicles. It figures health care adds $1,400 to the cost of every vehicle it makes in the United States.

Health-care spending now represents 15 per cent of the U.S. gross domestic product, Mr. Cowger said.

"For 15 per cent of GDP, heading to 17 per cent of GDP, are we getting what we're paying for?" He said the solution must come from a combination of efforts by the U.S. federal government, the companies themselves and employees.

Mr. Ford said Ford is attacking the issue internally by applying the same discipline to health care as it applies to slicing assembly costs on the shop floor, and it has had some success.

The North American division of DaimlerChrysler AG paid out $1.9-billion to 181,000 employees and retirees in 2003.

"You have some 500-pound gorilla issues and for the Big Three it's the cost of health care," said long-time industry observer David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich.

"It's a horrifyingly complex situation for the industry. It needs to be addressed as quickly as possible as a matter of high urgency," Mr. Cole said.

The costs the three companies face are also astronomical compared with their major offshore-based competitors that have shifted major amounts of production to North America -- Honda Motor Co. Ltd., Nissan Motor Co. Ltd., and Toyota Motor Corp.

By virtue of their much newer assembly plants, the Japan-based three have virtually no retirees and thus substantially lower health costs.

"It's a significant competitive disadvantage that their health-care costs are so burdensome," Scott Sprinzen, the auto industry analyst for New York-based ratings agency Standard & Poor's Corp., said of the Big Three.

The companies have taken incremental steps over the years to try to reduce the costs, but the benefits they offer are still generous compared with the rest of U.S. industry, Mr. Sprinzen said.

This clearly is considerably less of an issue in Canada with our taxpayer-financed system, but the three auto makers have started trying to tackle it at their Canadian operations as well, in bargaining with the Canadian Auto Workers union.

Some of the companies tried to increase employee payments for prescription drugs in contract bargaining in 2002, but the CAW drew a line in the sand.

It's almost certain to be an issue in contract talks later this year, CAW president Buzz Hargrove said.

"I would be shocked if they don't table some demands on health-care costs," Mr. Hargrove said.

The question is whether there's any relief on the horizon in the United States for Chrysler, Ford and GM.

It's doubtful, said Paul Ginsburg, president of the Center for Studying Health Care Change, a Washington-based research group.

"I just don't see a short-term way out of it," Mr. Ginsburg said.

He noted that companies in other big U.S. industries, such as steel, eliminated the costs by going into bankruptcy protection and later emerging to be taken over by new companies that pay no health-care benefits for retirees of the previous companies.