Members of the United Auto Workers have ratified an agreement that will allow
financially troubled General Motors Corp. to shave billions of dollars in
contributions to a retiree health care trust and cut certain retiree benefits,
union officials announced Friday, May 29.
The agreement, approved by nearly 75 percent of UAW members, also requires GM
to continue its defined benefit pension plan offered to UAW members.
The agreement on the eve of GM’s expected bankruptcy filing next week
modifies a 2007 accord between GM and the UAW that would have capped GM’s
burgeoning retiree health care liabilities. That agreement called for GM to
transfer assets—currently valued at $10 billion—from an existing voluntary
employees’ beneficiary association to a new VEBA controlled by the UAW. For
about $20 billion in cash and other contributions to the trust, GM no longer
would have been responsible for retiree health care benefits as of Jan. 1, 2010.
The accumulated value of those assets was estimated at roughly $50 billion last
year.
The new agreement maintains that VEBA-to-VEBA transfer arrangement. However,
instead of GM contributing about $20 billion in cash and other contributions,
the new VEBA will receive a note, payable in cash, with a principal amount of
$2.5 billion. The note will make cash payments of $1.38 billion, including
accrued interest, in 2013, 2015 and 2017.
The VEBA also will receive preferred stock in the restructured company with a
face value of $6.5 billion. The stock will pay an annual cash dividend of $585
million for as long as the VEBA holds the stock.
Finally, the VEBA will receive 17.5% of the common stock issued by the
restructured GM and warrants giving the VEBA the right to purchase an additional
2.5% of the reorganized company’s common stock.
Like an earlier agreement the UAW reached with Chrysler L.L.C., GM’s deal
will eliminate retiree vision and dental benefits effective July 1. The UAW said
further adjustments of retiree health benefits are likely in 2010 and 2011.
While an exact figure of how much the latest agreement will save GM is not
available, GM said the savings will eliminate the wage and benefits gap with its
competitors.
Filed by Jerry Geisel of Business Insurance, a sister
publication of Workforce Management. To comment, e-mail editors@workforce.com.
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