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GM To Pay Big For Retiree Benefits

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By TOM KRISHER and DEE-ANN DURBIN, The Associated Press

Published: September 29, 2007

DETROIT - Local union leaders on Friday endorsed a tentative agreement between General Motors and the United Auto Workers that requires GM to pay at least $35 billion for retiree health care and offers an unprecedented number of promises for future work at U.S. plants, according to a summary of the agreement provided by the UAW.

The agreement still is subject to a vote of GM's 74,000 UAW members, which should be completed by Oct. 10. UAW President Ron Gettelfinger said he is confident members will support the agreement and that Ford and Chrysler will match many of its terms.

'We're happy with this stuff,' he said.
GM spokesman Dan Flores said UAW workers and the company benefit from the agreement. GM did not release any specifics of the contract Friday; the company typically waits until the contract is ratified to make detailed comments.

'Not only does this new agreement enhance the security for employees and retirees, it enables GM to close competitive gaps in our business, and the projected competitive improvements will allow us to maintain a strong manufacturing presence in the U.S. with significant future investments,' Flores said.

Gettelfinger said he had not yet decided whether the union would negotiate with Ford or Chrysler next, but he expects to make that call next week. Both automakers have extended their contracts with the union indefinitely.

The linchpin of the deal is a trust fund for retiree health care, known as a Voluntary Employees Beneficiary Association. GM, which has about 340,000 retirees and spouses, wanted to form the association to get $51 billion in retiree health care debt off its books. The association will be run by an independent board overseen by the UAW.

GM will put $24.1 billion into the association in January and will pay an additional $5.4 billion to cover retirees' health care costs until the association takes over in January 2010. GM also will make up to 20 additional $165 million payments - to a maximum of $1.6 billion - to the association anytime the fund's level is insufficient to provide benefits for at least 25

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