General Motors and the United Auto Workers are close to finalizing a deal that would reduce the automaker's cash obligation to a retiree health care trust fund, according to people with knowledge of the matter, the Wall Street Journal reports.
UAW in 2007 agreed to establish the voluntary employees' beneficiary association, totaling $35 billion, that would cover health care costs of retired GM workers and their spouses starting in 2010. GM has paid about $15 billion into the fund, but under the deal now being discussed, the remaining $20 billion obligation could be paid using about $10 billion in cash and a 39% equity stake in the restructured GM that will be formed under the Treasury Department's "controlled bankruptcy" plan for the firm.
The deal would be subject to approval by UAW's 60,000 GM members, who likely would face "steep cuts" in pay and benefits as a result, as well as 20,000 additional layoffs, according to the Journal. Union officials also have expressed concern that the GM stock making up the equity stake is "illiquid and hard to value, posing a big risk for UAW members," the Journal reports. GM and UAW could agree to a final version of the deal "as early as next week," according to the Journal (Stoll, Wall Street Journal, 5/15).
Chrysler
A federal bankruptcy judge on Thursday denied a request from a group representing Chrysler's retired salary workers to have an official retiree committee participate in the firm's bankruptcy proceedings in an effort to protect the group's health care benefits. U.S. Judge Arthur Gonzales said decisions related to the benefits will be made by Chrysler's new owners, which could include a large stake for Italian automaker Fiat. Lawyers for the National Chrysler Retirement Organization stated that because responsibility for the group's health care benefits might not be transferred to the Chrysler that will emerge from bankruptcy, the group had a right to negotiate with the firm during the bankruptcy process.