GM: UAW Contract To Transfer $46.7B In Health Care Liability To The Union

Monday, October 15th 2007, 10:51 am

By: News On 6

DETROIT (AP) _ A new four-year contract between General Motors Corp. and the United Auto Workers will transfer an estimated $46.7 billion worth of retiree health care liability from the company to the union, the company said Monday.

That leaves GM with about $17.6 billion in retiree health care for salaried employees and other obligations, the company said. It was the first time GM has detailed its savings from the agreement.

``The 2007 national negotiations were in many ways the most complex and comprehensive that we've been engaged in,'' Rick Wagoner, GM chief executive and chairman, said during a conference call to explain the labor deal.

GM shares fell $1.32, or 3.1 percent, to $41.32 in morning trading after rising earlier as high as $42.84.

The agreement includes a company-funded, union-run trust called a Voluntary Employees Beneficiary Association and must be approved by federal courts. The trust would take over the health care obligations staring on Jan. 1, 2010 or on the date which any appeals or court challenges are exhausted, the company said.

GM will transfer $16 billion from an existing health-care trust to the new VEBA and will kick in an additional $2.5 billion in cash. The company said the VEBA will reduce its health-care liability for hourly employees to between $6 billion and $13 billion in 2010.

GM said it anticipates $3.3 billion in VEBA-related positive cash flow by 2011, reversing the current negative $3.3 billion in outflow.

The new contract also prevents the UAW from negotiating to increase GM's funding for the VEBA or make any other payments to provide retiree medical benefits.

The UAW on Wednesday ratified the historic agreement with GM and reached a similar agreement with Chrysler LLC the same day. Before the agreements were reached, the union went on strike against both companies.

Union leaders for Chrysler workers were in Detroit on Monday to get details of the tentative agreement with Chrysler, which must be ratified by members before it takes effect. Ford Motor Co. is next up in negotiations with the UAW.